Japan's consumers retreat to safety amid economic gloom | India's industrial output swings to negative ground | Greek lawmakers approve more cuts, but funding gap remains
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November 13, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Harsh 3.5% economic shrinkage confronts Japanese authorities
Maehara/Reuters
Japan's economy shrank at a surprising 3.5% annualized rate in the third quarter, piling new pressure on the government to act immediately to provide stimulus. "Judging from recent economic indicators, the possibility cannot be ruled out that the Japanese economy is already in a recessionary phase," said Seiji Maehara, minister of economic and fiscal policy. The latest pullback was broadly based, encompassing exports, consumption and business investment. The Wall Street Journal (tiered subscription model) (11/12)
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Japan's consumers retreat to safety amid economic gloom
One of the core problems facing Japan's economy is a stark absence of consumer confidence, with people reluctant to spend while the immediate future remains so clouded. "People have no incentive to take risks. They are just putting money into banks, and it's very unlikely they will move to securities in the future," said Masamichi Adachi, a senior economist at JPMorgan Securities Japan in Tokyo and a former central bank official. Bloomberg Businessweek (11/12)
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India's industrial output swings to negative ground
Surprising analysts who had forecast modest growth, India's industrial output fell 0.4% in September, and the country's trade deficit for October grew. Higher gold and petroleum prices drove the October rise in imports while exports declined 1.63% from a year before. High interest rates are contributing to the industrial slowdown even as confidence wanes over promised policy reforms. The Wall Street Journal (tiered subscription model) (11/12), The Hindu (India) (11/12)
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Greek lawmakers approve more cuts, but funding gap remains
Reuters
In a political move key to further financial aid, the Greek Parliament approved €9.4 billion in additional austerity-driven budget cuts for next year. Meanwhile, creditors calculate that Greece will still have a funding gap of about €15 billion through 2014 and more beyond that. BBC (11/12), Bloomberg (11/12)
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German economy is expected to slow further
The German economy is likely to extend its recent trend of deceleration, with only 0.2% growth expected for the third quarter, down from 0.3% in the second quarter and 0.5% in the first. The eurozone slowdown is finally taking a toll in Germany, where companies have recently put off needed investment and lost export market share. Reuters (11/12)
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New data likely to shake case for U.K. recovery
New U.K. data due this week are expected to put a damper on the optimism ignited by strong growth in the third quarter as rising unemployment and prices take their toll. In sum, this week's figures are likely to show that the country is "far from out of the economic woods," said Howard Archer, IHS Global Insight's chief U.K. and European economist. The Telegraph (London) (tiered subscription model) (11/12)
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U.S. lawmakers from both parties see little chance of going off "cliff"
Conrad/Reuters
Top politicians in both U.S. parties are predicting that the "fiscal cliff" will be avoided. Senate Budget Committee Chairman Kent Conrad, a Democrat, said he thinks lawmakers can reach a "framework agreement" that would push key tax and spending committees to address budget concerns for next year. Meanwhile, Republican Sen. Bob Corker said the likelihood is small that automatic cuts under the "fiscal cliff" scenario will occur. Bloomberg (11/11)
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
"Fiscal cliff" and eurozone worries, particularly over the situation in Greece, weighed on shares in Europe and the U.S. as the week opened on Monday. The Stoxx Europe 600 lost 0.27% to end the day at 269.53, and the S&P 500 was basically unchanged at 1,380.03 in thin trading. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/13), Bloomberg Businessweek (11/12), CNNMoney (11/12)
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Japan's GDP contraction unsettles Asian markets
Shares across Asia took their cue Monday from Japan's unexpectedly sharp economic contraction, something that is feared could grow into another persistent regional worry. The Nikkei fell 0.93% to 8,676.44, the Kospi was off 0.19% at 1,900.87, the S&P/ASX was down 0.31% to 4,448.00, and the Hang Seng edged up 0.21% to 21,430.30. Bloomberg Businessweek (11/12)
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Economic Trends & Outlook
Global business confidence ebbs to new low in survey
After three years of measuring global business confidence, Markit has recorded a new low in its latest survey. However, in the U.S. and China, the outlook isn't quite as grim as it was a year ago, "suggesting 2013 may turn out to be a better year for the world's two largest economies than 2012," commented Markit chief economist Chris Williamson. TheAsset.com (Hong Kong) (11/12)
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Moody's scales back growth outlook for G-20
Reuters
The outlook for growth is dimmer than earlier forecast for the Group of 20 nations' advanced and developing economies alike, according to Moody's, which now projects overall growth in the group of 2.7% this year and 3% in 2013. "Fiscal consolidation and volatility in financial markets will continue to weigh on business and consumer confidence, while heightened uncertainty hampers spending, hiring and investment decisions," Moody's said. Bloomberg Businessweek (11/12)
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Cautionary notes are sounded over indications of China recovery
Analysts are warning that China's strong export growth in the third quarter -- boosted by holiday orders and a spike in demand from the U.S. -- is unlikely to be sustained. Adding to signs of softening in China's economic recovery is a surprising decline in new yuan loans in October. On another worrisome front, China's central bank says it is keeping an eye out for inflows of so-called hot money. Barron's (subscription required) (11/12), Bloomberg (11/12), Caijing Magazine online (11/12)
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South Korea holds back on stimulus until need is great
Even though South Korea's economy is weakening, the country should hold back from stimulus for now and wait for when it's really needed, said Finance Minister Bahk Jae-wan. Bahk acknowledged the many struggles of ordinary Koreans but said it would be "irresponsible" to launch measures that would prove ineffective now and prevent strong action at crucial junctures in the future. Yonhap News Agency (South Korea) (subscription required) (11/12)
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HSBC, China sovereign wealth fund upbeat on Asia
Lou/Reuters
HSBC predicts a bright near term for Asia, with better prospects for growth, including in China. Separately, China's sovereign wealth fund says it plans to focus more on Asia to profit from expected regional growth. The Taipei Times (Taiwan) (11/13), China Daily (Beijing) (11/12)
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Slight falloff is seen in Malaysia's 3rd-quarter growth
Government spending helped counter a dropoff in Malaysia's exports in the third quarter, with economic growth in the period pegged at a 4.8% pace, down from 5.4% in the previous quarter, economists say. "The drag on growth has come from the external sector, where the trade balance has narrowed, with exports stagnating and imports of capital and consumer goods rising amid sustained domestic demand," said Daniel Wilson, an economist with ANZ in Singapore. The Business Times (Singapore) (11/12)
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Philippine FDI plummets as global woes grow
Foreign direct investment in the Philippines plunged to just US$13 million in August from US$76 billion a year before as investors retreated amid general concerns over an unsteady global economy, particularly in the U.S. and Europe. The latest figure was also down sharply from a US$108 million inflow in July. Business World (Philippines) (11/12)
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Capital Markets & Financial Products
RQFII ETFs with dual counters attract investors
Reuters
Renminbi Qualified Foreign Institutional Investor exchange-traded funds saw a big influx of institutional investors from around the world last week when two Chinese fund houses added Hong Kong trading counters. The dual-counter model introduced by CSOP and E Fund Management allows investors to buy and sell RQFII ETFs using either renminbi or Hong Kong dollars. AsianInvestor.net (11/12)
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Taiwan transaction tax drives some investors to Hong Kong
Local investors' trading on Taiwan's stock market has fallen by 4 percentage points as many have shifted business to Hong Kong to avoid a transactions tax. To counter the loss, some legislators have urged a boost in the investment quota for mainland qualified domestic institutional investors. China Economic News Service (Taiwan) (11/12)
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Cambodia's young stock market about to come alive with IPOs
Cambodia's new stock market has seen an almost unbroken calm since its launch and a $20 million flotation of state-owned Phnom Penh Water Supply Authority in April. But the new year should bring new excitement, with at least four planned initial public offerings by local companies. The Wall Street Journal (tiered subscription model) (11/12)
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Regulatory Update
EU's AIFMD might cause industry shakeout that extends to Asia
A wave of investment industry consolidation extending to Asia might be one major result of the EU's Alternative Investment Funds Management Directive and its attendant reforms, experts said at the International Transfer Agency Summit Asia 2012 in Hong Kong. The central problem stems from the policy of imposing liability on custodians for loss of assets. AsianInvestor.net (11/12)
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