CFA Institute Financial NewsBrief: Asia Pacific Edition

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March 4, 2013

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2 indicators suggest China's economic rebound flattening
China's economic expansion cooled in February, according to two indicators that may point to reduced growth prospects early in the new year. The official purchasing managers' index eased to 50.1 from 50.4 in January, and the HSBC Flash PMI dropped to 50.4 from 52.3. "February's PMI continued to tread lower, indicating economic growth is set to shift from a rebounding trend to that of stabilization," said analyst Zhang Liqun of the Development Research Center, a state think tank. Caijing Magazine online (3/1) , Forbes (3/1)

Tighter money policy in China likely to be delayed
Signs of a still struggling Chinese economy may mean no monetary tightening anytime soon. "China's recovery is mostly based on fiscal and monetary stimuli unleashed in the fourth quarter of 2012 mainly through infrastructure investment and a housing market recovery. The private sectors are still struggling with an overcapacity problem," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong. Bloomberg (3/3)

February factory gauge shows U.S. strength


Reuters

U.S. factories hummed in February, with an activity gauge by the Institute for Supply Management perking up to a reading of 54.2. Analysts credit the gain to continuing strength in the housing market and improved spending by businesses as well as higher exports. Recent U.S. gains, the best since 2009, come as manufacturing elsewhere in the world lags. The Wall Street Journal (3/1)

U.S. consumers upbeat amid mixed economic signals
Despite conflicting factors bearing on U.S. consumers, their confidence has picked up, rising to a three-month high in February. The University of Michigan-Thomson Reuters consumer-sentiment index registered 77.6 last month, up from 73.8 in January. "Expected job gains have partially offset concerns about higher payroll taxes and the impending reduction in federal spending. Unfortunately, those expected job gains will be harder to actually accomplish given that the economy faces weakened consumer demand due to lower take-home pay as well as reduced federal spending and employment," said survey economist Richard Curtin. MarketWatch (3/1)

U.S. sequestration takes effect as 2 parties remain split
So-called sequestration budget cuts took effect Friday in the U.S., but the harm will be felt only gradually, giving the two parties time to try to bridge their differences. Financial Times (tiered subscription model) (3/1)

U.S. Fed chief affirms commitment to easing
U.S. Federal Reserve Chairman Ben Bernanke on Saturday reaffirmed the central bank's commitment to monetary easing, warning that any imminent return to higher rates could choke off recovery. Financial Times (tiered subscription model) (3/2)

Eurozone jobless rate extends its climb at 11.9% in January


Reuters

With wildly varying national jobless rates, the overall eurozone unemployment rate rose to a record 11.9% in January, adding to signs of a regional economy in distress. Worse is projected, as "rising unemployment, higher taxes, weakening wage growth and tightened credit are eating into household purchasing power and constraining household spending," said Anna Zabrodzka, an economist for Moody's Analytics in Prague. Los Angeles Times (tiered subscription model) (3/1)

Italy may need new vote, but eurozone leaders are unswayed
Italy appeared to be edging toward feared new elections after last week's inconclusive balloting. Even so, leaders of the eurozone preparing to meet in Brussels continued to insist on austerity policies that have roiled Italian politics and that remain unpopular across much of the region. Bloomberg (3/3)

Several central banks to meet this week with rates in the balance
Central bankers due to meet this week around the world are expected to reveal the direction of interest rates in a global environment marked by soft economies. Analysts expect the bankers -- in Europe, the U.K., Australia, Canada and Japan -- will point to lower rates, with the risk for any outliers being a rise in that nation's currency. The Wall Street Journal (3/3)

2013 may be a rebound year for investment banks
In what is widely seen as a possible rebound year for global investment banking, JPMorgan stands at the top of the stack of leading banks, according to Bloomberg Markets' ninth annual ranking of the best-paid investment banks measured by their fees. However, much could change over the course of the year, even as analysts project renewed corporate interest in big deal-making. Bloomberg Markets magazine (3/2013)

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Market Activities

INTERNATIONAL MARKETS OVERVIEW
U.S. manufacturing numbers helped buoy stocks Friday on both sides of the Atlantic. In Europe, however, the gain only moderated a loss for the day as investors focused on rising eurozone unemployment and lower business activity in China. The Stoxx Europe 600 eased 0.32% to 289.02, and the S&P 500 ended with a gain of 0.23% to 1,518.20. Here is a continuously updated list of global stock indexes. The Wall Street Journal (3/4) , MarketWatch (3/1) , CNNMoney (3/1)

Asian stocks gain for the week
Asian markets finished last week with mixed results Friday but gains for the week on favorable economic news from the U.S. and further signs of determination by the Japanese government to boost the nation's economy. On Friday, the Nikkei rose 0.41% to close at 11606.38, the Hang Seng fell 0.61% to 22,880.22, the Kospi jumped 1.12% to 2,026.49 and the S&P/ASX eased 0.35% to 5,086.10. Bloomberg (3/1)

Economic Trends & Outlook

Japan's deflation extends into January


Reuters

Deflation was still firmly in place in Japan in January, with consumer prices declining 0.2% to stand at 99.1 against a 2010 base of 100. It is the third straight month of deflating prices and comes as the new government drives for an inflation rate of 2%. United Press International (3/1)

Value of nonperforming loans rises in China
The ratio of nonperforming loans on the books of Chinese commercial lenders eased to 0.95% by the end of December, but the total by value rose to 492.9 billion yuan, according to the China Banking Regulatory Commission. Although the ratio for the industry remains low, said CBRC Chairman Shang Fulin, the rate of growth is picking up due to industries in difficulty, such as solar, steel, retail and transportation. Caijing Magazine online (3/1)

India can, should grow much faster, central bank chief says


Subbarao/Reuters

A growth rate nearly double the current 5% to 6% is necessary if India hopes to advance as a nation, said Reserve Bank Governor D. Subbarao. And this is possible, he said. "We are quite happy that India is growing at 5 to 6%, but I must tell you that is not sufficient. That is much less than our potential. ... Unless we grow at 9 to 10% year on year for about 10 years, we cannot pull hundreds of millions of people out of poverty," Subbarao said. The Economic Times (India)/Press Trust of India (3/3)

Dropping exports, imports keep South Korea in trade surplus
Imports and exports were down last month for South Korea, keeping the nation's trade balance in surplus for the 13th straight month, reported the Ministry of Knowledge Economy. The year-on-year drop in both figures was attributed in part to the Lunar New Year holiday. The Korea Herald (Seoul)/Yonhap News Agency (3/1)

New South Korean administration to focus on household debt
With South Korea's household-debt-to-GDP ratio at 81%, the new administration of President Park Geun-hye is expected to set the problem as a priority to be addressed directly. An integral part of the strategy is likely to be a "bad bank" to take up overdue loans. The Korea Herald (Seoul) (3/1)

Thai inflation extends cooling trend
A second consecutive month of lower inflation in Thailand may portend monetary tightening by the central bank later in the year. For now, however, the bank is expected to keep its policy rate at 2.75%. Star Publications (Malaysia)/Reuters (3/2)

Capital Markets & Financial Products

Nomura sees only modest prospects for Singapore market
Singapore's property market may prove crucial as the stock market is expected to produce single-digit returns this year at best, Nomura Equity Research says. Citing a "weak macro backdrop," Nomura notes that "the market's price-to-book of 1.4x is not excessive relative to history but ROE [return on equity] has been declining, reflecting a subdued profit outlook." The Business Times (Singapore) (3/2)

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