FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Latin America: Investors News Letter 10 May 2013

Mexico

Mexico Industry Output Falls Three Times More Than Forecast

Mexico’s industrial production fell three times more than analysts forecast in March, reinforcing expectations that the central bank will cut interest rates for the second time since 2009 later this year.

Factbox: Key facts about Mexico’s tax system

MEXICO CITY – Mexico’s new government has promised a comprehensive review of its tax system, to be announced in the second half of 2013 along with an overhaul of energy policy.

Obama tells Mexicans a ‘new Mexico’ is emerging

US-Mexico Stereotypes Must Be Broken

America Movil sees material impact from Mexico telecom reform

Brazil

Despite winning top world trade job, even Brazil looks beyond WTO

Brazil campaigned hard to get the top job at the World Trade Organization this week but behind closed doors even it acknowledges that the WTO’s main mission – pushing forward in global trade talks – looks for the moment like a lost cause.

BM&FBovespa Quarterly Earnings Trail Estimates as Costs Increase

Petronas Malaysia bolsters Brazil’s Batista with $850 million oil-field buy

Venezuela’s Maduro gets firm Brazilian backing, trade

Brazilian M&A Picks Up as Asians Seek Cheaper Oilfields

Latin America

Argentina’s Deadbeat Special: Buy a 4% Bond or Go to Jail

Panama Canal Cuts Water Use as Drought Prompts Energy Rationing

Brazil’s Odebrecht plans $20 billion spend, targets Peru as key investment
CHICAGO TRIBUNE – Brazilian conglomerate Odebrecht plans to invest $20 billion globally over the next three years, mostly in Latin America and much of it in Peru

Saipem wins $500m offshore contracts in Latin America
- Italy-based engineering services provider Saipem has received new engineering and construction (E&C) offshore contracts, worth a total value of $500m, in Latin America.

APMT prepares for high growth markets
Although global container volumes are not predicted to grow as rapidly over the next five years as they have over the past decade, high growth emerging markets will require higher levels of productivity and rely heavily on expanded inland services

Cartagena aims to be a global megaport by 2017
The Colombian Caribbean port of Cartagena is undertaking extensive infrastructure and technology upgrades in an effort to be one of the world’s 30 best megaports by 2017.

Filed under: Argentina, Brazil, Central America, Chile, Colombia, Energy & Environment, Malaysia, Mexico, News, Peru, Risk Management, Venezuela, , , , , , , , , , , , , , , , , , , ,

Latin America: Investors News Letter 18 April 2013

MEXICO

Mexico Peso Declines as U.S. Earnings Crimp Outlook for Exports

Mexico says Nestle to sell Pfizer baby food business

MEXICO CITY – Swiss food giant Nestle will sell the assets of U.S. pharmaceutical company Pfizer’s baby food business in Mexico, a business it acquired globally in an $11.85 billion deal last year, Mexico’s competition watchdog said on Monday.

Analysis: Mexico’s smaller homebuilders set to gain as top three struggle

MEXICO CITY – Mexico’s top three homebuilders, facing heavy debt burdens and holding land where Mexicans no longer want to live, will sell fewer homes this year, leaving a market wide open for smaller rivals or even private equity funds to snap up business.

Mexican manufacturing: from sweatshops to high-tech motors

SILAO, Mexico – Made in Mexico is increasingly more likely to mean cars than clothes as the country’s manufacturing sector moves away from the low-skill, high-volume production lines of the past toward more sophisticated products.

VIP Interview: Enrique Peña Nieto, forging the future

Enrique Peña Nieto, President of Mexico, on a new spirit of democracy and cooperation, and the economic future of Mexico.

BRAZIL

Itau Bet on Stocks Outside Brazil Leads Latin America Funds

QItau Unibanco Holding SA has found a winning strategy for the Itau Latam Pacific mutual fund: avoiding shares from the bank’s home country, Brazil.

 Brazil’s Votorantim Cimentos files for $5.4 billion IPO

Votorantim Cimentos S.A., Brazil’s biggest cement producer, on Wednesday filed with regulators to raise up to $5.4 billion in an initial public offering of its units.

Brazil clears Pão de Açúcar’s appliance stores deal

BRASILIA/SAO PAULO – Grupo Pão de Açúcar SA , Brazil’s biggest retailer, won regulatory approval on Wednesday for its 2009 purchase of the Casas Bahia and Ponto Frio appliance chains in exchange for selling less than 8 percent of their store fronts.

Brazil Indian-farmer standoff intensifies, tribes storm Congress

BRASILIA – Brazilian Indians are trying to derail a congressional proposal to change the way indigenous lands are recognized, intensifying a standoff between the powerful farm sector and a carefully protected minority by literally storming the floor of Congress.

Special Report: Rough justice as Brazil tries to right past wrongs to Indians

MARAIWATSEDE, Brazil – Damião Paridzané was nine years old in 1966 when the Brazilian Air Force loaded him and hundreds of other Xavante Indians onto a cargo plane. | Video

UK-based TMO Renewables building cellulosic fuel plant in Brazil

SAO PAULO – UK-based TMO Renewables said on Friday it plans to build Brazil’s first commercially viable second-generation ethanol plant, betting on the South American country’s need for non-food-based biofuels.

Brazil’s Embraer looks to shock Lockheed with price of cargo jet

RIO DE JANEIRO – Brazilian planemaker Embraer SA is looking to shock rivals with the price of its KC-390 military transport plane when it starts booking firm orders within the next 12 months, according to a senior executive.

Higher volumes and more investment for Brazilian railfreight
INTERNATIONAL RAILWAY JOURNAL – Despite a slowdown in economic growth, Brazil’s freight railways invested nearly Reais 4.9bn ($US 2.4bn) in new infrastructure and equipment last year, a 6.6% increase over 2011,

LATIN AMERICA

British Firms Explore Trade Opportunities in Mexico and Colombia

A four-day trade mission to Mexico and Colombia by medium-sized British businesses took place in March, focusing on high value opportunities in key sectors.

Jamaica’s decades of debt are damaging its future

The latest IMF loan does not ‘rescue’ Jamaica, whose debt must be written off if its people are to take control of their economy

 The Logistics Hub Project and Jamaica’s Development
An ideal location midway between North and South America, in close proximity to the Panama Canal contributes to this advantage. The Panama Canal will be widened by 2015 to accommodate wider ships and Jamaica hopes to capitalise on this by expanding its port facility and affiliated infrastructure spread over four south coast parishes: namely Kingston, St Catherine, Clarendon and St Thomas. An IDB (2010) study on the productivity of the LAC region concluded that “ports and airports are grossly inefficient.

Latin America’s top port faces logistical woes
Santos’ cargo handling volumes made a strong start to 2013, with the port hitting a record high of 7.9 MM tons, up 27 percent year-on-year, according to Santos’ Port Authority CODESP. If the trend continues, the port is expected to close 2013 with total cargo traffic of 109 MM tons, up from 104 MM last year and 97 MM in 2011. But a record soybean harvest this year has clearly overwhelmed its storage and loading capacity. “It seems that our infrastructure can’t cope with the growth in grain production,” said Sergio Mendes, executive director of the Brazilian Cereal Exporters Association (ANEC). Last month, the logistical nightmare reached epic proportions, with a 64-kilometer traffic jam of trucks waiting to unload their soybean cargo outside Santos port. And the port congestion and resulting shipment delays led Sunrise Group, China’s largest soybean importer, to cancel an order to buy 2 MM metric tons of Brazilian soybean.

Latin America’s Largest PV Projects

As of April 1, 2013, 9.8 gigawatts of large-scale PV projects had been announced in Latin America and the Caribbean. Currently, the generating capacity of projects in operation is just 114 megawatts. Of the 9.8 gigawatts’ worth of announced projects, 731 megawatts have signed off-take agreements of some sort (power purchase agreements, feed-in tariff contracts, etc.) and a further 168 megawatts are under construction. These large numbers have generated a lot of hype for various Latin American markets, in particular, for Chile, Mexico, and Brazil.

Filed under: Banking, Brazil, Central America, Chile, Colombia, Energy & Environment, Latin America, Mexico, Peru, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , ,

Latin America: Investor News Letter 21.September 2012

Mexico

Analysis: China worries spur Mexico stock market flows

MEXICO CITY – Mexico has been on the wrong side of China’s economic boom for the last decade, but is now seeing an upturn in its fortunes as the Asian powerhouse’s economy slows and international stock pickers look to hedge their bets.

Can Mexico live up to its investment potential?
Deutsche Bank Downbeat On Brazil In Wake of Intervention; Mexico Retail Sales Up

Mexico, the “Forgotten” Emerging Market


Brazil

Brazil mulls raising Mexico car trade quota – sources

Brazil is considering raising a three-year bilateral auto trade pact quota it agreed to with Mexico in March, potentially allowing Mexican exporters to sell around $350 million worth of additional vehicles to the Brazilian market annually.

Brazil: PE cools in Brazil, warmes in Mexico and Andes

US urges Brazil in “clear terms’ not to hike tariffs

Brazil reacts to US stimuli saying it will keep the Real ‘devalued’ and competitive

Brazil ethanol returns to US as biofuel rules pave way

Goldman Sachs Plans Private-Equity Comeback in Brazil


Latin America

Colombia rapidly becoming another “positive surprise” from Latinamerica

Uruguay’s economy suffers slight deceleration in 2Q but on track to the 4% target

IMF calls on Argentina to implement measures on the quality of official data

Moody’s changes Argentina rating outlook to negative from stable

Deal Analysis: Panama City Metro Line 1

Gazprom in talks with Argentina’s YPF on LNG supplies

Private equity in LatAm: less new money, more deals

Shadow banking to dominate in LatAm projects

Cuba struggles with foreign investment, growth

China Steps Up Push Into Latin America

Korean Art fair highlights Latin American art

Filed under: Argentina, Banking, Brazil, Central America, Chile, China, Colombia, Energy & Environment, Events, Latin America, Mexico, Peru, Risk Management, Wealth Management, , , , , , , , , , , , , , , , , , , , , , ,

Latin America: Investors Newsletter 13 April 2012- Alternative Latin Investor

Alternative bioenergy M&A picks up steam in LatAm
-
Ethanol deals wait for better days

Alternative bioenergy crops could drive the next big wave of M&A in Latin America, much like sugarcane drove activity during the ethanol boom in the early 2000s, according to industry sources.

European Bank Crisis
-How will it affect Latin America?

European banks provide 45% of all the external credit lines to LatAm. Could a pullback from their international lending activities affect the operations of LatAm companies?

Other News from Latin America

LatAm tops for emerging Private Equity 

UBS Promotes LatAm Dealmaker 

Latin America’s Start Ups Expand: From Silicon Valley to Tequila Valley 

GM urges Latin America to honor trade pacts 

Private Equity Poised For Gains In Brazil On Growth Ahead 

Brazil Stocks Erase Gains, Slump On Foreign Investor Exit

Mexican firm eyeing Cuba offshore oil projects

Mexico steps out of Brazil’s shadow

Chile LAN-Brazil TAM Tie-Up Co Seen Having 2014 Revenue Of $17.5 Billion

YPF Jumps on Report Argentina Seeks Control: Buenos Aires Move

Investors Should Say Goodbye Argentina

Peru Central Bank Buys $668 Million to Stem Sol Gain: Lima Mover

Uruguay’s Credit Rating Returned to Investment Grade by S&P

Fitch revises outlook on 5 Venezuelan banks to negative

Ecuador Chosen as Best Overseas Residential Investment Market

 

Source: Alternative  Latin Investor, 13.04.2012

Filed under: Argentina, Brazil, Chile, Colombia, Latin America, Mexico, Peru, Risk Management, Venezuela, , , , , , , , , , , , , , , , , , , , ,

The Global Crisis Reaches China: Unrest Spreads as Growth Stalls

China’s leaders are currently contending with declining demand, rising debt and a real estate bubble. Some factories are laying off workers, suffering financial losses or even closing as orders from crisis-plagued Europe dry up. The economic strains are frustrating workers and consumers in the country, threatening the political establishment and Beijing’s economic miracle.

This October was the third straight month Chinese exports decreased. Along with it, the hopes of German manufacturers that Asia’s growth market might help lift them out of the global crisis as it did in 2008 are also evaporating. This time China faces enormous challenges of its own — a real estate market bubble and local government debt — that could even pose a risk to the global economy.

Related article: Every Chinese Province bankrupt like Greece –  Chinese Regime nearly bankrupt  – 17.11.2011

A police special forces unit appears suddenly. One moment, a worker named Liu* is marching back and forth in front of city hall in Dongguan, China, with about 300 colleagues from the bankrupt factory Bill Electronic. “Give us back the money from our blood and sweat!” they chant.

The next moment, their shouts turn to screams as a few hundred uniformed police with helmets, shields and batons, along with numerous plainclothes security forces, leap out of olive green police vans. The demonstration leaders, including Liu, are rounded up on the side of the street by police dogs. Within just a few minutes’ time, the communist authorities have successfully suffocated the protest.

The men and women, most of them young adults, are packed into yellow buses and hauled back to their factory, where the government exerts massive pressure: By afternoon, they must consent to make do with 60 percent of the wages they are owed by the employment office. Anyone who refuses, officials warn, will receive nothing at all.

The new global crisis has reached China. Debt problems in Europe, the country’s most important trading partner, are starting to dim prospects here in the nation that has effectively become the world’s factory, as well. The unstable United States economy and threat of a trade war between the two superpowers make the situation even more uncertain. As the US presidential election campaign starts too heat up, American politicians are vying to outdo one another in protectionist declarations directed toward their communist rival.

Disillusioned Workers

For Liu, the factory worker, his country’s economic miracle is certainly over for now. Until recently, he worked 12 hours a day assembling accessories for DVD players. But then there was less and less work to do, he says, and a while back, the boss informed workers that fewer orders were coming in from Europe.

After the police break up the demonstration, Liu, now daunted, wanders through his city’s dusty streets, passing row upon row of factories and residential buildings. “We just wanted our full wages, but they set the police on us,” he says. He’s lost his faith in the party and the government.

Especially here in the export region of Guangdong, an experimental laboratory of Chinese capitalism, hardly a day goes by without new bankruptcies or protests. The Yue Chen shoe factory in Dongguan, which produces athletic shoes for a parent company in Taiwan that supplies brands such as New Balance, is in a state of emergency. With orders dropping off, the manufacturer has fired 18 managers. Workers have seen overtime pay eliminated, and normal wages are barely enough to live on. Frustration is so high that some shoe factory workers also went to protest in front of city hall. About 10 of them were injured in the clash with police, some young women from the factory report.

The situation outside the gray factory complex is tense. Thugs in plainclothes guard the entrance, photographing and intimidating anyone who talks to the workers. Inside the factory, the showdown between bosses and employees goes on. Workers sit inactive in cheerless factory rooms. The management has switched off the power in some of the halls where workers normally sew and glue together shoes.

In the rest of China as well, more and more assembly lines are grinding to a halt. In Wenzhou in eastern China, a city known for making cheap lighters, shoes and clothes, a large number of business owners are on the run from their creditors, the private shadow banks that last lent them money. Some of these businesspeople even secretly removed machinery from their factories before taking off.

Demand Drop in Europe and China

China’s showcase industries are also feeling the crunch of the drop in European demand. Suntech Power Holdings, for example, which manufactures solar panels in Wuxi, near Shanghai, reported third-quarter losses of $116 million (€87 million). During the same quarter of the previous year, the company generated $33 million in profits.

Just recently, Asia’s champion exporter was the object of admiration from foreign executives and politicians, a victor in the global financial crisis. Some even believed they’d found a superior alternative to crisis-ridden Western-style market economies in Beijing’s authoritarian-style capitalism.

German carmakers, in particular, let themselves be carried away by China’s growth and made enormous investments. China is Volkswagen’s most important market, and the company hopes to sell 2 million cars there by the end of this year.

But the car boom is slowing. “We haven’t received a single new order in nine days,” admits a smartly dressed salesman at Dongguan’s Porsche dealership. “We’ve never experienced that before.” Many business owners are short on cash, he adds. “They used to mostly pay cash, but now they prefer to buy on credit.”

Cheap Chinese brands such as BYD (“Build Your Dreams”) are also having a harder time selling their cars. Important governmental tax incentives for buying cars ran out last year, and major cities such as Beijing are attempting to ease their congested streets by restricting the number of new automobiles. In October, people in China bought roughly 7 percent fewer cars than in the previous month.

Economic Missteps?

At first, it seemed as if Beijing’s state capitalists had found the magic recipe for endless growth. In 2009, they pumped 4 trillion yuan (the equivalent of €430 billion) — China’s largest stimulus package in history — into building ever more modern highways, train stations and airports. Tax incentives led millions of farmers to purchase refrigerators and computers for the first time.

More or less on the party’s orders, banks threw their money at the people’s feet, and local governments were particularly free about getting themselves into debt. By the end of 2010, outstanding debt stood at 10.7 trillion yuan — nearly a quarter of China’s entire economic output.

Much of these funds went, directly or indirectly, into real estate construction. Local governments discovered that selling land for building made for a lucrative source of revenue — and of collateral, so banks would continue to issue new loans. Thousands of farmers were driven off their fields so that villas and apartment buildings could be built.

Many of those development projects, often megalomaniac undertakings from the start, are now ghost towns. In China’s 15 largest cities in October, the number of newly auctioned building plots decreased by 39 percent compared to October 2010.

While many in the West hold out hope that China can solve the euro and dollar debt crisis with its foreign currency holdings, the rift between rich and poor within the country is growing. The “harmonious society” promised by Hu Jintao, head of the government and of the Communist Party, is at risk.

The country’s central bank has increased interest rates five times since mid-2010 to get inflation under control, while at the same time forcing banks to hold larger reserve funds. Beijing hopes this method will allow it to orchestrate a “soft landing” from its own economic boom. But the maneuver entails risks. Along with the construction industry, the motor driving China’s economy up until now, other sectors such as cement production, steelmaking and furniture construction stand to lose vitality as well.

Part 2: Will Rising Middle Class Turn against Government?

If the real estate bubble bursts, it is sure to turn China’s rising middle class against the government. Until now, the nouveau riche has viewed the Communist Party as a guarantee of their own prosperity. Recently, however, outraged apartment owners organized a demonstration in downtown Shanghai, protesting the decline in the value of their property.

Wang Jiang, 28, points to a nearly complete apartment block in Anting, one of the city’s suburbs. The software company manager bought an apartment on the 16th floor of the building for €138,000 in early September. It was a steep price for 82 square meters (883 square feet), especially since the building is located in an industrial area, hemmed in by factories and highways. But Wang was determined to get in on the boom. He didn’t even take the time to view the housing complex before he bought the apartment. Where else, after all, should he have invested his assets, if not in real estate?

Now China’s state-run banks are paying their customers negative interest and Shanghai’s stock market is considered a high-risk casino, where a few major governmental investors are believed to manipulate exchange rates at will.

Wang’s apartment isn’t even finished yet, but he no longer feels any joy about moving in — not now that the real estate company is offering similar apartments in the same complex for about 20 percent less.

Wang feels he was deceived about his apartment’s resale value. “What are they thinking?” he demands. “Surely they can’t just erase a portion of my assets?”

But they can.

Wang and many other furious apartment owners went to the real estate company’s salesroom to protest the drop in value. Suddenly, Wang relates, someone started smashing the miniature models of apartments. After that, in the blink of an eye, the company’s guards grabbed him and hauled the protesters to the police in minibuses. “We were interrogated until 2 a.m. in the morning,” Wang says. Some of the protesters, he adds, are still in prison and authorities won’t tell their families anything.

A Political Quandary

Whether in Dongguan or Shanghai, cracks seem to be forming everywhere in Chinese society. As long as the one-party dictatorship kept growth in the double digits, most people accepted their lack of freedom. Now, though, Beijing is facing a dilemma. Tough police crackdowns will hardly get the consequences of the stagnating economy under control in the long term. But nor are government subsidies enough to stimulate the economy. It seems neither money nor force will help.

Chinese Premier Wen Jiabao recently announced a “fine-tuning” of his economic policy: Banks should grant more generous loans, especially to small and medium-sized export companies, he said.

The economic situation now is far more complicated than it was after the 2008 global financial crisis, says economist Lin Jiang. In 2008, Chinese exports collapsed and roughly 25 million migrant workers had to return from factories to their home provinces.

Back in Dongguan, authorities have no cause at the moment to fear any further protest from Liu, the factory worker. He’s too busy looking for a new place to stay. When he lost his job, he also lost his spot in one of the electronics factory’s residences.

* Liu’s name has been changed by the editors in order to protect his identity.

Source: Spiegl Online, 08.12.2011 By Wieland Wagner

Filed under: China, Countries, News, Risk Management, , , , , , , , , , , , , ,

China and Mexico: Strategic Partners or Competitors? 中国与墨西哥: 战略伙伴关系还是竞争对手?.

China and Mexico’s bilateral relationship is the subject of an ongoing debate, characterized, in general, by strongly conflicting views. On one hand, there are the ones that quite often quote unfair trade practices from China, or Chinese companies who have suffered losses of time, energy and money when entering the Mexican market.

It is quite common to listen at business meetings that after months of negotiations, companies found out that their potential local partner was not the most adequate. Sadly, cross-cultural misunderstandings often contributed to break the potential association, since the local partner didn’t have the financial strengths nor was knowledgeable enough of the local market, etc. On the other hand, bad experiences are not a must. It is also possible to identify success stories from companies establishing in China, and vice-versa, doing business profitably. The examples include small and medium size companies on trading, sourcing, and exporting to and from China; but also large corporations with standalone investments or join ventures with local players.

At Mexican malls you can buy electronic products with a Chinese brand manufactured in Mexico; in China, flour made “tacos” have paved their way to gain preferences in the Chinese middle class.

Even tough for many specialists the investment and trade flow between China and Mexico is not significant in terms of value and diversity of industries; there are some figures that are worth keeping in mind. Based on official statistics in 1990, Mexico exported nine million USD and imported around fifteen million USD from China. For 2010, the bilateral trade reached almost fifty billion USD, while the bilateral trade between India and China reached about sixty billion USD in that same year. This is an impressive amount if we consider Mexico does not share borders with India, and Mexican population is around ten times smaller than the Indian.

On December 11, 2011; the agreed program between Mexico and China on compensatory import duties will come to an end. It is expected for this to reinvigorate the debate on trade and business practices. Nevertheless, it would be worth it to keep in mind that in a twenty years period, Mexico’s exports to China had a compound annual growth rate of over 36 per cent (CAGR), while imports from China to Mexico registered a CAGR of 49 percent. Moreover, although exports from China are generally associated to end products, during the last decade, imports such as intermediate products have increased significantly.

Therefore, if you are doing business between both countries, it would be relevant to review if your company is growing two digits too. Although there is no “fail-safe” recipe for doing business between China and Mexico, the more informed the company is, the greater its chances are of succeeding. On this issue, you can review complimentary articles on innovation, resource allocation, and metrics, among many other factors to be considered in a successful market expansion strategy.

At Deloitte, from Tijuana to Shenzhen and from Hong Kong to Monterrey, we have highly experienced professionals ready to help you succeed in China and Mexico. For more information on our services email us at: deloitte_contacto@deloittemx.com

Source: Deloitte Mexico, 25.11.2011 -  José Luis Enciso deloitte_contacto@deloittemx.com

Filed under: Asia, China, Latin America, Mexico, News, , , , , , , , ,

VAM: Vietnam Market Analysis September 2010

Market Update - September was characterized by mixed macro signals and continued sideways movement of the stock markets. Of the positive news, the most important piece was that of 3Q10 GDP growth being estimated at 7.16%, making the first nine months growth reach 6.52%. Full year GDP growth target was thus revised up to 6.7-6.8% given the last quarter is usually the most robust period of economic activity.

Though preliminary estimate of September trade deficit of US$1.05 billion appeared worrying, August number was at the same time substantially revised down to just US$395 million from US$900 million, making year-to-date trade deficit stand at US$9.05 billion. The two consecutive upward revisions for July and August exports further confirm beliefs that exports are starting to pick up following the three depreciations totalling 10.9% over the last 10 months. On the domestic front, for the first nine months, industrial production was up 13.8% whilst retail sales revenue soared 25.4% compared to the same period last year.

While economic growth is edging up, inflation and exchange rate are likely becoming issues in the last three months of the year. September CPI came in at 1.31% MoM and 8.92% YoY. In fact, this was the first month-on-month increase of over 1% since this February and the sharp acceleration was driven by higher prices of foods, construction materials, gas and education fees with the last factor being a seasonal one. The 2% devaluation of the dong in August was also fully translated into the months CPI high rise. Though the government has expressly determined to tighten control over consumer prices through year end to meet its full year 8% target, with year-to-date CPI increase being 6.46%, we think this target is unrealistic given CPI tends to go up faster during this period of the year when festive season is coming.
Exchange rate is another concern when the unofficial rate, after months of converging with the official rate, suddenly heated up in September, now trading at 1% above the upper limit of the official trading band. Recent fluctuation of exchange rate in the unofficial market is primarily attributable to strong increases in gold price in the last two months, accelerating inflation and widening trade deficit. The unfortunate mix of a record-high gold price, an unexpected soar in September CPI, and the divergence of official and unofficial exchange rates have once again sparked fears of inflation and further devaluation toward year end.

The mixed macro picture apparently did not help improve the poor market sentiment. The market continued its prolonged sideways movement when the VN-Index closed the month at 454.52, almost flat against September.

Our View – We think the current macro economic uncertainties will continue to cause overhang on the stock market. Despite the potential catalyst from 3Q10 corporate earnings, investors will likely remain cautious in October given a large amount of stocks oversupply and mixed macroeconomic signals. We still uphold our long-term interest in consumers, IT, Telecom, and pharmaceutical sectors. For short-term seasonal play, we are closely watching natural rubber and some high-dividend defensive stocks. Overall, we strongly advise investors to look closely at individual firms performances rather than choosing specific industry in such a volatile condition.
Source: VAM, 08.10.2010

 

Filed under: Exchanges, News, Vietnam, Wealth Management, , , , , , , , ,

BlackRock Bob Dolls: 10 prediction for the next 10 years

“10 Predictions for the Next 10 Years” by BlackRock’s Bob Doll and what it means to investors:

  1. U.S. equities experience high single-digit percentage total returns after the worst decade since the 1930s.
  2. Recessions occur more frequently during this decade than only once a decade as occurred in the last 20 years.
  3. Healthcare, information technology and energy alternatives are leading growth areas for the U.S.
  4. The U.S. dollar continues to be less dominant as the decade progresses.
  5. Interest rates move irregularly higher in the developing world.
  6. Country self-interest leads to more trade and political conflicts.
  7. An aging and declining population gives Europe some of Japan’s problems.
  8. World growth is led by emerging market consumers.
  9. Emerging markets weighting in global indices rises significantly.
  10. China’s economic and political ascent continues.

Read Bob Doll’s full report  10 Predictions for the next Decade

Source:BlackRock / Carral Sierra, 02.08.2010

Filed under: Banking, Brazil, China, Energy & Environment, Japan, Korea, Mexico, News, Risk Management, Wealth Management, , , , , , , , , , , , , , , , , , , , , , ,

A Definitive Guide to Investing in Panama

Following up with last years release of the Offshore Banking report which, in the midst of the global banking crisis, gravitated towards Panama, Alternative Latin Investor has released an in-depth report of the of the country.

Through extensive interviews, site visits and research the report deals with the main sectors relevant to foreign investors, Real Estate, Commodities, Banking and General Business practices as well as an exclusive interview with Former Panamanian president Nicolás Ardito. With Panama being the integral point of trade and business in the Caribbean, this report provides essential insight for those interested in getting involved in the region.

The economic overview analyzes the trends and indicators affecting the outlook of the Panamanian economy. The real estate portion of the report covers where to invest, coastal developments and “insider tips” from the director of a local Real Estate firm. For those interested in commodities investing – the report highlights the prized Panamanian Geisha coffee bean as well as a complex discussion regarding Teak investment in the region. The final segment covers the details and benefits of banking in panama.    

Alternative Latin Investor Panama Report For free access to the full content of both Panama Outlook 2010 and other ALI publications, visit: http://www.alternativelatininvestor.com

 About Alternative Latin Investor:

ALI believes in the future of the Latin American alternative investment industry, but feels there is a lack of information regarding this sector which does not allow for growth or global exposure.


Every two months ALI releases a digital magazine
  in addition supplemental in-depth reports area also released, such as the just the current Panama Outlook: 2010 as well as Offshore Banking: Latin America 2009.  Both LatAm Commercial Real Estate and Latin Hedge Funds are slated for release later this year.


Through creating a platform for industry professionals to submit articles concerning their areas of expertise, investors can benefit from the experience of alternative investment insiders. Through participation in Alternative Latin Investor industry professionals will be able to create new synergies both within the region and beyond.

Filed under: Banking, Central America, Latin America, News, Services, Wealth Management, , , , , , , , , , , , ,

BMV- Mexican Stock Exchange changes Crossing Rules

The Mexican Stock Exchange authorities announced on November 19th that starting on November 30, new rules for crossing stock on the BMV will be implemented.

As of November 30, crosses of 50% of the average daily traded volume of the last six months in a particular stock, will be able to be crossed “clean” (without interference from other brokers) as long as the cross is executed at a price between the bid and the offer.

Source: IXE, 20.11.2009

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, Risk Management, , , , , , , , ,

Mexico the NEW China ?

When it comes to global manufacturing, Mexico is quickly emerging as the “new” China.

According to corporate consultant AlixPartners, Mexico has leapfrogged China to be ranked as the cheapest country in the world for companies looking to manufacture products for the U.S. market. India is now No. 2, followed by China and then Brazil.

In fact, Mexico’s cost advantages and has become so cheap that even Chinese companies are moving there to capitalize on the trade advantages that come from geographic proximity.

The influx of Chinese manufacturers began early in the decade, as China-based firms in the cellular telephone, television, textile and automobile sectors began to establish maquiladora operations in Mexico. By 2005, there were 20-25 Chinese manufacturers operating in such Mexican states Chihuahua, Tamaulipas and Baja.

The investments were generally small, but the operations had managed to create nearly 4,000 jobs, Enrique Castro Septien, president of the Consejo Nacional de la Industria Maquiladora de Exportacion (CNIME), told the SourceMex news portal in a 2005 interview.

China’s push into Mexico became more concentrated, with China-based automakers Zhongxing Automobile Co., First Automotive Works (in partnership with Mexican retail/media heavyweight Grupo Salinas), Geely Automobile Holdings (PINK: GELYF) and ChangAn Automobile Group Co. Ltd. (the Chinese partner of Ford Motor Co. (NYSE: F) and Suzuki Motor Corp.), all announced plans to place automaking factories in Mexico.

Not all the plans would come to fruition. But Geely’s plan called for a three-phase project that would ultimately involve a $270 million investment and have a total annual capacity of 300,000 vehicles. ChangAn wants to churn out 50,000 vehicles a year. Both companies are taking these steps with the ultimate goal of selling cars to U.S. consumers.

Mexico’s allure as a production site that can serve the U.S. market isn’t limited to China-based suitors. U.S. companies are increasingly realizing that Mexico is a better option than China. Analysts are calling it “nearshoring” or “reverse globalization.” But the reality is this: With wages on the rise in China, ongoing worries about whipsaw energy and commodity prices, and a dollar-yuan relationship that’s destined to get much uglier before it has a chance of improving, manufacturers with an eye on the American market are increasingly realizing that Mexico trumps China in virtually every equation the producers run.

“China was like a recent graduate, hitting the job market for the first time and willing to work for next to nothing,” Mexico-manufacturing consultant German Dominguez told the Christian Science Monitor in an interview last year. But now China is experiencing “the perfect storm … it’s making Mexico – a country that had been the ugly duckling when it came to costs – look a lot better.”

The real eye opener was a 2008 speculative frenzy that sent crude oil prices up to a record level in excess of $147 a barrel – an escalation that caused shipping prices to soar. Suddenly, the labor cost advantage China enjoyed wasn’t enough to overcome the costs of shipping finished goods thousands of miles from Asia to North America. And that reality kick-started the concept of “nearshoring,” concluded an investment research report by Canadian investment bank CIBC World Markets Inc. (NYSE: CM)

“In a world of triple-digit oil prices, distance costs money,” the CIBC research analysts wrote. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

Indeed, four factors are at work here.

Mexico’s “Fab Four”

  • The U.S.-Mexico Connection: There’s no question that China’s role in the post-financial-crisis world economy will continue to grow in importance. But contrary to the conventional wisdom, U.S. firms still export three times as much to Mexico as they do to China. Mexico gets 75% of its foreign direct investment from the United States, and sends 85% of its exports back across U.S. borders. As China’s cost and currency advantages dissipate, the fact that the United States and Mexico are right next to one another makes it logical to keep the factories in this hemisphere – if for no other reason that to shorten the supply chain and to hold down shipping costs. This is particularly important for companies like Johnson & Johnson (NYSE: JNJ), Whirlpool Corp. (NYSE: WHR) and even the beleaguered auto parts maker Delphi Corp. (PINK: DPHIQ) which are involved in just-in-time manufacturing that requires parts be delivered only as fast as they are needed.
  • The Lost Cost Advantage: A decade or more ago, in any discussion of manufactured product costs, Asia was hands-down the low-cost producer. That’s a given no more. Recent reports – including the analysis by AlixPartners – show that Asia’s production costs are 15% or 20% higher than they were just four years ago. A U.S. Bureau of Labor Statistics report from March reaches the same conclusion. Compensation costs in East Asia – a region that includes China but excludes Japan – rose from 32% of U.S. wages in 2002 to 43% in 2007, the most recent statistics available. And since wages are advancing at a rate of 8% to 9% a year, and many types of taxes are escalating, too, East Asia’s overall costs have no doubt escalated even more in the two years since the BLS figures were reported.
  • The Creeping Currency Crisis: For the past few years, U.S. elected officials and corporate executives alike have groused that China keeps its currency artificially low to boost its exports, while also reducing U.S. imports. The U.S. trade deficit with China has soared, growing by $20.2 billion in August alone to reach $143 billion so far this year. The currency debate will be part of the discussion when U.S. President Barack Obama visits China starting Monday. Because China’s yuan has strengthened so much, goods made in China may not be the bargain they once were. Those currency crosscurrents aren’t a problem with the U.S. and Mexico, however. As of Monday, the dollar was down about 15% from its March 2009 high. At the same time, however, the Mexican peso had dropped 20% versus the dollar. So while the yuan was getting stronger as the dollar got cheaper, the peso was getting even cheaper versus the dollar.
  • Trade Alliance Central: Everyone’s familiar with the North American Free Trade Agreement (NAFTA).  But not everyone understands the impact that NAFTA has had. It isn’t just window-dressing: Mexico’s trade with the United States and Canada has tripled since NAFTA was enacted in 1994. What’s more, Mexico has 12 free-trade agreements that involve more than 40 countries – more than any other country and enough to cover more than 90% of the country’s foreign trade. Its goods can be exported – duty-free – to the United States, Canada, the European Union, most of Central and Latin America, and to Japan.

In the global scheme of things, what I am telling you here probably won’t be a game-changer when it comes to China. That country is an economic juggernaut and is a market that U.S. investors cannot afford to ignore.  Given China’s emerging strength and its increasingly dominant financial position, it’s going to have its own consumer markets to service for decades to come.

Two Profit Play Candidates

From a regional standpoint, these developments all show that we’re in the earliest stages of what could be an even-closer Mexican/American relationship – enhancing the existing trade partnership in ways that benefit companies on both sides of the border (even companies that hail from other parts of the world).

In the meantime, we’ll be watching for signs of a resurgent Mexican manufacturing industry that’s ultimately driven by Chinese companies – because we know the American companies doing business with them will enjoy the fruits of their labor.

Since this is an early stage opportunity best for investors capable of stomaching some serious volatility, we’ll be watching for those Mexican companies likely to benefit from the capital that’s being newly deployed in their backyard.

Two of my favorite choices include:

  • Wal Mart de Mexico SAB de CV (OTC ADR: WMMVY): Also known as “Walmex,” this retailer has all the advantages of investing in its U.S. counterpart – albeit with a couple of twists. Walmex’s third-quarter profits were up 18% and the company just started accepting bank deposits, a service that should boost store traffic. And while the U.S. retail market is highly saturated – which limits growth opportunities – there are still plenty of places to build Walmex stores south of the border. After all, somebody has to sell products to all those thousands of workers likely to be involved in the growing maquiladora sector.
  • Coca-Cola FEMSA SAB de CV (NYSE ADR: KOF): Things truly do go better with Coke – especially higher wages and an improved lifestyle. According to Reuters, Mexicans now consume more Coca-Cola beverages per capita than any other nation in the world. The company just posted a 25% jump in its third-quarter net earnings, aided by a strong 21% jump in revenue. Coca-Cola FEMSA continues to experience strong growth from its Oxxo convenience stores, and strong beer sales, too. And all three product groups are logical beneficiaries of strong maquiladora development and the growing incomes and rising family wealth that will translate into higher consumer spending in the immediately surrounding areas.

Source: Money Morning, 13.11.2009 by Keith Fitz-Gerald, Chief Investment Strategist,  Money Morning/The Money Map Report

Filed under: Brazil, China, Countries, India, Latin America, Mexico, News, , , , , , , , , , , , , , , , ,

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, , , , , , , , , , , , , , , , , , , , , , , , ,

ChiNext: A Wrongheaded, Sheltered Start

The lesson from the ChiNext launch is as old as China’s stock market: Too much regulatory protection leads to speculation.

(Caijing Magazine) China’s growth enterprise board ChiNext recently opened after 10 years in the making. Hopes ran high, and trading sizzled. But the debut quickly led to disappointment, recalling the now-sputtering Shenzhen SME board, which began with a dramatic flash but eventually cast a pall over growth stock trading.

Shares for all 28 companies on the ChiNext board skyrocketed to the 10 percent limit on opening day. Shares in Jinya Technology, for example, surged 80 percent in a buying frenzy. Overall, first-day gains averaged 106 percent.

But it was a flash in the pan, unchecked by regulator warnings and a fat book of regulatory measures designed to prevent speculation. Within a few days, prices tumbled. Suddenly, ChiNext was nothing more than a new game in town that pulled players into the same kind of mania seen a couple of years ago when PetroChina A-shares reached the stratosphere in an IPO and when stock warrants had manipulated, rollercoaster price changes. Moreover, some of the 28 newly tradable companies became subjects of critical media stories about instant wealth, overselling of pre-IPO shares by management, and cases of cooking the books.

How did this newborn trading platform, so carefully planned and nurtured through a long gestation, fall captive to the old, genetic flaws of China’s stock markets? A crucial factor was excessive protection.

A successful growth enterprise board is not just a capital-raising platform; start-ups are far more valuable than blue chips in many ways. ChiNext was designed to encourage start-ups and new technology companies. It should be in a position to help traders pan for gold and turn ugly ducklings into swans.

But ChiNext was never given enough room to let the market play its resource allocation role. In the first place, IPOs for ChiNext still had to go through a government authorization process. Each of the 28 companies was chosen by regulators from among hundreds of applicants. This review process, which is based on company documents provided to the government rather than through public information disclosure, may look like accountability in the eyes of investors. But it actually restricts market selectivity.

The selection process was designed to signal that each of the 28 companies had a good chance for survival. So after giving permission to this first batch of companies for board trading, regulators suspended review of new applications for a month and concentrated on the ChiNext launch. Media euphoria and promotion activity by energetic brokers further diluted any sense of risk awareness among the trading public.

Yet such artificial control of supply and demand distorts the market. And this is nothing new. Past experience has shown that it’s futile in such circumstances to prevent volatility through regulation and investor warnings following an application process.

Moreover, speculation fire was fanned by murky delisting requirements. Regulations covering growth enterprise stocks on the Shenzhen Stock Exchange, which sponsors ChiNext, say companies should be warned before being delisted. The exchange, however, can rescind a warning if a company implements a “restructuring plan.” This means that, despite the rule for delisting start-ups, the exchange still leaves a back door open to creating shell companies – and attracting punters – by allowing restructuring. Such loose market conditions help whip up speculative frenzy.

Of course, conditions are similar on the A-share main board. Excessive protection stems from a regulatory intent to list quality companies and inject vitality into the market. And in the area of delisting, strict enforcement is out of the question because regulators feel compelled to bow to public sentiment and give any shaky company another chance in the name of investor protection.

However, this protection oversteps the bounds and chokes market vitality. It will surely backfire. Regulators have created conditions for rent-seeking by listed companies, which then turns investors into speculators.

Success for ChiNext should depend on several big-picture factors including growth potential, investment environment and rule of law in society. Regulators can not and should not guarantee financial results and return on investment; they should not set goals for market size and trading volume. Otherwise, even perfect schemes would be hijacked by powerful interests under the banner of protecting investor interests.

Ensuring healthy development of the market is the duty of the China Securities Regulatory Commission as well as stock exchange operators. But their jobs should focus on making and implementing rules, not making market choices. They should concern themselves with improving the trading system, watching interest groups, ensuring adequate information disclosure, penalizing offenders, and educating investors. These tasks, ranging from the minute to critical issues for certain interest groups, can be easily overlooked. They should not.

In the international arena, successful growth enterprise boards are rare and their development paths are strewn with obstacles. China, as the world’s largest emerging economy, has no shortage of innovative ideas. And the market is active indeed. What China lacks, however, is a system that ensures healthy market function. The less-than-perfect inauguration of ChiNext should sound an alarm for regulators. It is not too late to take corrective action.

Source: Cajing, 10.11.2009 By Hu Shuli

Filed under: Asia, China, Exchanges, News, Risk Management, , , , , , , , ,

Tokyo Stock Exchange lists Indian ETF – S&P CNX Nifty linked ETF

Today, the Tokyo Stock Exchange approved the listing of the “NEXT FUNDS S&P CNX Nifty Linked Exchange Traded Fund” managed by Nomura Asset Management Co., Ltd.. The ETF is planned to be listed on Thursday, November 26, 2009.

This is the first ETF linked to Indian stocks to be listed on markets in Japan. The “S&P CNX Nifty Index” to which the ETF is linked is comprised of the 50 premier issues of the National Stock Exchange of India.

Code 1678 (ISIN JP3047100007)
Name NEXT FUNDS S&P CNX Nifty Linked Exchange Traded Fund
Fund Administrator Nomura Asset Management
Listing Date November 26, 2009
Trading Unit 100 units
Underlying Index S&P CNX Nifty Index

TSE entered into a memorandum of understanding with the National Stock Exchange of India on October 15, 2006. Through this ETF, TSE hopes to supply investors with better access to the Indian securities market and contribute to the development of the markets in both of our countries.

With this listing there will be a total of 69 ETFs listed on the Tokyo market, bringing us closer to the goal of 100 listed ETFs by fiscal year 2010, as laid out in the Medium-Term Management Plan. TSE will continue working to diversify the ETF market and improve the convenience of our market for all investors.

Additional ETF’s listed in Tokyo include Brazil’s IBOVESPA, China A Share CSI300 as well as  ETC (Exchange Trade Commodities) like Gold, Silver, Platinum and Palladium. See also TSE lists Brazilian ETF.

Tokyo Stock Exchange officel ETF site
ETFs on TSE November 2009 (.doc and .cvs)

Source: Tokyo Stock Exchange 06.11.2009

Filed under: Asia, Exchanges, India, Japan, News, , , , , , , , , , , , , , , , , , , , , , , , , ,

Schwab’s Commission-Free ETFs: A Watershed Event

On November 3, 2009, marked a watershed event for the ETF landscape. It’s the day that Schwab (SCHW), absent from the ETF industry for past 16 years, upped the ante for any company thinking about getting into the business. Charles Schwab Investment Management, Inc. launched its first four ETFs.

At first glance, the new Schwab ETFs are nothing special – just four broad based core holdings, just like dozens already available from other fund companies. But look closer, and you will see they are also the lowest fee funds within each of their respective asset classes.

Look yet again, and see that these ETFs are also commission-free for Schwab brokerage customers. This is historic. Just as no-load no-transaction fee mutual funds changed the mutual fund landscape, commission-free ETFs will forever alter the way that ETFs are perceived. With this one change, nearly every argument in favor of mutual funds instead of ETFs goes away. Dollar cost averaging? No longer costly with commission-free ETFs. Small account size? Not a problem anymore.

Schwab has arrived, and they didn’t do it quietly. Now all eyes will turn to the competition to see how they react. Will other brokerage firms roll out their own ETF brands? Will iShares and SPDRs get into the discount brokerage business? “Strategic alliances” will be discussed, but in all likelihood are not feasible since there are not enough fees to share. Schwab has erected a significant barrier to entry and is now well positioned to go after the lucrative 401k market.

The four new ETFs launched by Schwab:

  • Schwab U.S. Broad Market ETF (SCHB) (SCHB overview) will track the Dow Jones U.S. Broad Stock Market Index with a 0.08% expense ratio. The underlying index represents the largest 2,500 U.S. equities and is float-adjusted market cap weighted.
  • Schwab U.S. Large-Cap ETF (SCHX) (SCHX overview) will track the Dow Jones U.S. Large-Cap Total Stock Market Index with a 0.08% expense ratio. The underlying index represents the largest 750 U.S. equities and is float-adjusted market cap weighted.
  • Schwab U.S. Small-Cap ETF (SCHA) (SCHA overview) will track the Dow Jones U.S. Small-Cap Total Stock Market Index with a 0.15% expense ratio. The underlying index represents the stocks ranked 751–2,500 of the largest 2,500 U.S. equities and is float-adjusted market cap weighted.
  • Schwab International Equity ETF (SCHF) (SCHF overview) will track the FTSE Developed ex-US Index with a 0.15% expense ratio. The underlying index covers1,400 large cap and mid cap stocks from more than 20 developed international markets.

Online trades of Schwab ETFs are commission-free at Schwab, while trades of third-party ETFs are still subject to commissions.

Unfortunately, the first day of trading had some glitches. SCHA traded at the wrong price for the about the first ten minutes with those who bought early receiving about a 10% discount from NAV, unless those trades get busted. SCHX appeared to have a similar problem but fewer shares were involved. Market makers had trouble maintaining the appropriate depth on SCHB, and it appears some larger orders created price spikes. SCHF had the most orderly first day of the bunch.

Schwab expects to offer four additional ETFs in December: Schwab U.S. Large-Cap Growth ETF (SCHG), Schwab U.S. Large-Cap Value ETF (SCHV), Schwab International Small-Cap Equity ETF (SCHC), and Schwab Emerging Markets Equity ETF (SCHE).

Source: Seeking Alpha, 04.11.2009

Filed under: News, Services, , , , , , ,

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