U.S. jobless rate falls to 4-year low | U.S. Fed can be expected to continue improvising as "twist" ends | Italy's Monti to step down
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December 10, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Output, sales figures confirm China rebound
Reuters
China's industrial production climbed 10.1% year-on-year last month, while retail sales surged 14.9% in two heartening signs tending to confirm an economic rebound. In further good news, inflation clocked in at 2%, up slightly from October but still half the target rate, and a survey revealed improved investment in November. However, a new measure of urban unemployment pegged it at 8.1% at midyear, far above the officially reported rate, indicating that China's new leaders might take action to address the problem. Bloomberg (12/9), Xinhuanet.com (China) (12/8), China Daily (Beijing)/Xinhuanet (12/9)
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U.S. jobless rate falls to 4-year low
The U.S. unemployment rate fell to 7.7% in November, the lowest since December 2008, as employers added 146,000 jobs. Economists, however, described the latest report as mixed, with much of the decline in the headline rate due to discouraged job seekers giving up. The Inquisitr (12/8)
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U.S. Fed can be expected to continue improvising as "twist" ends
The U.S. Federal Reserve's so-called Operation Twist is about to end, but more innovative moves can be expected in a bid to shield the economy from the aftereffects of the "fiscal cliff" or any solution that avoids the mandated spending cuts and tax increases but imposes others. Above all, however, "the bond market is counting on the Fed -- and can keep counting on it -- to hold short-term interest rates near zero for some time to come," said Kathy A. Jones, fixed-income strategist for the Schwab Center for Financial Research. The New York Times (tiered subscription model) (12/8)
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Italy's Monti to step down
Monti/Reuters
Mario Monti, the prime minister who has guided Italy through its ongoing debt struggles to date, says he will resign after losing the support of the party of former Prime Minister Silvio Berlusconi, who is waiting in the wings to make another run for office. Monti says he will step down after he and his unelected Cabinet of technocrats try to formulate and pass a budget that keeps Italy on course to get its financial house in order. The Salt Lake Tribune (Utah)/The Associated Press (12/8)
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Big Greek banks participate in debt buyback
Greece's debt relief package got a vote of confidence from the country's three largest banks, which said they participated in the government's €10 billion buyback offer Friday. The banks had secured assurances that shareholders would not challenge the banks legally over their participation. Bloomberg (12/7), Financial Times (tiered subscription model) (12/7)
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Goldman is fined for lapses over hidden position
Reuters
The U.S. Commodity Futures Trading Commission has ordered Goldman Sachs to pay a US$1.5 million fine for "risk management" lapses that allowed a trader to conceal an $8.3 billion position. Financial Times (tiered subscription model) (12/7)
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Market Activities
U.S., European shares gain
European shares got a boost Friday from a favorable U.S. jobs report for November while U.S. shares benefited from a favorable jobs report for November. The Stoxx Europe 600 index edged up 0.13% to 279.17, and the S&P 500 added 0.29% to close the week at 1,418.07. Looking ahead in the U.S., shares might be under pressure this week as investors anticipate the possibility of higher taxes in 2013. The Wall Street Journal (tiered subscription model) (12/10), The Wall Street Journal (tiered subscription model) (12/7), MarketWatch (12/9), Reuters (12/9)
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Asian shares end third positive week on a mixed note
Asian shares posted a third week of gains with a lift from urban development plans in China and further indications of a recovering economy in the U.S. On Friday, however, markets were mixed, with the Nikkei edging down 0.19% to 9,527.39, the Hang Seng losing 0.26% to 22,191.17, the Kospi adding 0.40% to 1,957.45 and the S&P/ASX advancing 0.94% to 4,551.80. Bloomberg (12/7)
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Economic Trends & Outlook
Goldman: India's economy might pleasantly surprise next year
Reuters
With the right policy implementation, India is poised to exceed growth expectations next year, says Goldman Sachs, noting that lately "the Indian stock market seems to be quite excited about something." For the time being, however, India's central bank plans to fix its attention on worrisome inflation rather than the lagging growth rate, said Subir Gokarn, deputy governor of the Reserve Bank of India. The Economic Times (India)/Press Trust of India (12/9), The Hindu (India)/Press Trust of India (12/8)
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Bank of Japan is expected to take up further easing
With downside risks for Japan's economy taking on new prominence, the Bank of Japan might weigh additional easing at its Dec. 19-20 meeting, said bank Deputy Governor Kiyohiko Nishimura. He held open the kind of action likely to be considered, saying that preconceived plans are likely to be set aside. The Yomiuri Shimbun (Japan)/Jiji Press (Japan) (12/7)
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South Korea manufacturing growth slows to a near standstill
South Korea's manufacturing growth was virtually nonexistent at 0.4% in the third quarter, reflecting the global slowdown. It was the worst reading in more than three years. The Korea Herald (Seoul) (12/9)
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Singapore's 2013 growth outlook hinges on outside factors, S&P says
Reuters
A number of external factors could reduce Singapore's economic growth next year to as little as 0.6%, Standard & Poor's projects. Among the lurking dangers, S&P says, are the possibility of lagging investment in China, spreading effects of the eurozone crisis, a downturn in the slowly recovering U.S. economy and a surge in oil prices. The Business Times (Singapore) (12/8)
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Taiwan consumer inflation edges down as wholesale prices retreat
Taiwan's consumer price inflation registered 1.59% annually last month, the lowest since May. Meanwhile, wholesale inflation recorded its ninth consecutive month in negative territory. China Economic News Service (Taiwan) (12/7)
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Capital Markets & Financial Products
South Korea's solid fundamentals are seen as key to bond investors
Macroeconomic soundness is the main draw for South Korea's sovereign bond market, even as the country's growth rate declines, said Kwon Young-sun, a managing director and senior Korea economist at Nomura International. Also noting the likelihood of a freeze in the Bank of Korea's key rate next year, Kwon noted that "there are many who make their investments from long-term perspectives regardless of ups and downs of the key rate, and thus I see the freeze will not have a huge impact on investments in bonds." Maeil Business Newspaper (South Korea) (12/7)
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CBRC advises banks on capital ratios ahead of Basel III
Reuters
The China Banking Regulatory Commission is advising banks to "stick to the capital replenishing mechanism based on endogenous capital accumulation" ahead of implementation of Basel III next month. In addition, the CBRC noted that systemically important banks will have minimum capital thresholds of 6.5% for core tier 1 capital ratio, 7.5% for tier 1 capital ratio and 9.5% for capital ratio. Caijing Magazine online (12/7)
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Doubt is cast on perceived safety of bond investing
With shocks to the system likely in coming years and with interest rates and bond-price volatility currently artificially low, bonds are not necessarily safe investments at this juncture, Khairul Azwa Bahrin, director of risk management and compliance at KWAP, said at AsianInvestor's Southeast Asia institutional investment forum in Singapore. The expected shocks will be "driven mainly by government policies and other central banks that tend to mimic the U.S. Federal Reserve," he said. AsianInvestor.net (12/7)
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Regulatory Update
Olam is no Enron, former Temasek managing director says
Although Olam International might be guilty of moving "a little bit too fast and too far," the company bears no resemblance to Enron, as suggested by short seller Muddy Waters, according to Michael Dee, a former senior managing director at Temasek Holdings. Olam is "a company that saw a tremendous business opportunity, to take an existing platform and grow it on the back of relatively inexpensive debt," Dee said in an interview. The Business Times (Singapore) (12/8)
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Hong Kong's new IPO rules introduce stricter standards
Reuters
Hong Kong's new rules for initial public offerings will be considerably stiffer and more like those currently in place in the U.S., sources say. The new rules include the possibility of criminal liability for banks if they help bring to market companies with false statements in their IPO prospectuses, the sources note. The Wall Street Journal (tiered subscription model) (12/7)
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Outlook is cloudy for South Korean financial firms
Low growth and low rates are likely to put a strain on South Korea's financial firms in 2013 and years following, the Financial Supervisory Service projects. "The financial sector grew at 6% in 2010 and 3.6% last year. We're expecting 2% this year and hopefully 3% in 2013, but most firms are drawing up plans for the worst," said FSS Governor Kwon Hyeok-se. Yonhap News Agency (South Korea) (subscription required) (12/9)
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