Morgan Stanley paints 2013 scenarios: Tame and bleak | Historically inerrant indicator points to U.S. recession | U.S. housing starts rise as permits decline
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November 21, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition

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Bernanke laments "fiscal cliff" but indicates no planned Fed stimulus
U.S. Federal Reserve Chairman Ben Bernanke pointed to no additional stimulus from the bank but scolded lawmakers for letting the country skate so near the "fiscal cliff." Noting a "disappointingly slow" economy, Bernanke told the Economic Club in New York that "realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery -- indeed, by the reckoning of the Congressional Budget Office and that of many outside observers, a fiscal shock of that size would send the economy toppling back into recession." CNBC (11/20)
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Morgan Stanley paints 2013 scenarios: Tame and bleak
Projected global growth of 4% next year could be halved and much of the world thrown into recession if the U.S. tumbles into recession and the European Central Bank fails to cut rates or delays its eurozone bond buying program, Morgan Stanley predicts. "More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks," Morgan Stanley says in a report. CNBC (11/20)
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Historically inerrant indicator points to U.S. recession
A little-known but historically correct combination indicator produced by the Philadelphia Federal Reserve points to recession for the U.S. The ADS Business Conditions Index, which looks at six factors pertaining to employment, incomes, industrial output and gross domestic product, has pointed downward since 2010 and is currently flashing recession in the near term. Seeking Alpha (11/20)
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U.S. housing starts rise as permits decline
U.S. housing starts surged 3.6% in October to a four-year high, the Commerce Department reported, but permits sought for future construction were down. The department said the figures were little affected by Hurricane Sandy. Smart Business (11/2012)
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Bank of Japan stands pat on further easing ahead of pivotal elections
The focus now shifts to December after the Bank of Japan decided on no further monetary easing at its latest meeting. Elections next month are expected to install Japan's opposition party, which has called for much more aggressive action on the lagging economy. Bloomberg Businessweek (11/19)
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France keeps steady course after Moody's downgrade
Noting little market response to Moody's downgrade of France's credit rating, President Francois Hollande said the government would proceed as planned with its gradual belt-tightening. But Hollande warned that more difficult decisions lie ahead for France to maintain its "credibility" in the markets. The Washington Post (tiered subscription model)/The Associated Press (11/20)
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German companies planning job, investment cuts
Looking over their shoulders at the encroaching effects of the eurozone crisis, more German companies are planning to cut their workforces than add employees in the coming year, according to a survey by the IW economic institute. Lower investment is also in store for 2013, with economists predicting a stagnant economy in the final quarter of this year and moving forward. The Herald Sun (Melbourne, Australia) (tiered subscription model)/Australian Associated Press (11/20)
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Germany to decide on more aid for Greece
A key event in the next helping of aid for Greece is expected next week with a vote in Germany's parliament, according to one senior lawmaker. "We want to do this in next week's sessions," said Michael Grosse-Broemer, leader of Chancellor Angela Merkel's conservatives in the Bundestag. He said approval is likely. (China) (11/20)
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Market Activities
European shares gained Tuesday on optimism over a cease-fire in Gaza and prospects for progress on Greek financing, but U.S. stocks wavered through a day marked by sharp selling of Hewlett-Packard shares. The Stoxx Europe 600 rose 0.34% to 269.49, and the S&P 500 ended a bare 0.07% higher at 1,387.82. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/21), Bloomberg Businessweek (11/20), CNNMoney (11/20)
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Asian shares get another lift from U.S. housing indicator
Asian stocks got another boost Tuesday from U.S. housing numbers, this time from a rise in October housing starts. Japanese shares, however, stalled out after a recent rally spurred by expectations of post-election economic stimulus next month. The Nikkei edged down 0.12% to 9,142.64, the Hang Seng was off 0.16% at 21,228.28, the Kospi added 0.64% to 1,890.18, and the S&P/ASX rose 0.56% to 4385.70. Bloomberg (11/20)
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Economic Trends & Outlook
South Korea's growth potential shrinks post-crisis
South Korea's potential growth rate -- which had been an annual 6.1% before the financial crisis -- is now just 3.7%, according to new government estimates. Next year, JPMorgan predicts, the country's gross domestic product should grow by more than 3%. Separately, the Bank of Korea reported the country's external debt holdings rose to a record US$419.4 billion in September. The Korea Herald (Seoul) (11/20), The Korea Herald (Seoul) (11/20), (South Korea) (11/20)
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South Korean companies step up direct financing
South Korea saw a 14.1% jump from September to October in corporations' direct financing through stocks and bonds, according to the Financial Supervisory Service. However, the total for January through October was down 2.6% year-on-year. (South Korea) (11/20)
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Foreign investment in China falls in October; Japan pulls back sharply
Amid slowing domestic growth and a sluggish world economy, foreign direct investment in China fell in October for the 11th time in the past year, the Commerce Ministry reported. Contributing to the decline was a sharp drop in investment from Japan stemming from an unresolved territorial dispute. China Daily (Beijing) (11/20), Financial Times (tiered subscription model) (11/20)
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India vows to meet deficit target
India's government pledges it will pull out all the stops in a bid to remain within its budget deficit target of 5.3% of gross domestic product in the current fiscal year. "I think our attempt will be to see that we remain as close as possible to revised fiscal deficit that has been indicated by the Finance Ministry. ... There are many actions that are possible," said C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council. The Hindu (India)/Press Trust of India (11/20)
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India considers relief for beleaguered exporters
India's government is weighing various measures, including interest subsidies, to provide relief to exporters squeezed by the global slowdown. The prolonged decline has also "prompted the worried government to think of extending sops for labor-intensive sectors like textiles," a Commerce Ministry official said. October exports were off 1.63% from a year before as the nation's trade gap widened to US$21 billion. The Economic Times (India)/Press Trust of India (11/20)
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Despite falling exports, Taiwan's balance of payments surplus grows
Although Taiwan's exports were down, imports declined further in the third quarter as the country's balance of payments surplus widened to US$3.7 billion. The current account surplus, meanwhile, grew to US$8.42 billion. The Taipei Times (Taiwan) (11/21)
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Capital Markets & Financial Products
Philippine bonds react as rate cut appears on horizon
With slowing economic growth and inflation at a four-month low, speculation over an imminent rate cut by the Philippines' central bank has pushed the 15-year bond yield to its lowest in three months. Rates have been cut four times so far this year, and the bank's next meeting is set for Dec. 13. Bloomberg Businessweek (11/20)
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Regulatory Update
Xstrata holders OK Glencore merger
The biggest obstacle was cleared as Xstrata shareholders approved the long-coming merger with Glencore International. Next in line are necessary approvals from China and the EU. The Wall Street Journal (tiered subscription model) (11/20)
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New bank rules coming on schedule in China
Tougher capital requirements for banks will be introduced on schedule in China, which doesn't plan to follow other countries in delaying implementation, said Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission. "China has promised to anticipate the establishment of the global financial supervision system and adopt the international standards. ... It will be a Chinese version of capital criteria, tailored to suit Chinese banks' balance sheets, risk and business models," Wang said. China Daily (Beijing) (11/20)
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Editor's Note
Thanksgiving holiday in U.S.
Because of the Thanksgiving Day holiday in the U.S., CFA Institute Financial NewsBrief: Asia Pacific Edition will publish on Thursday, Nov. 22, but will not publish on Friday, Nov. 23. Publication will resume on Monday, Nov. 26.
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Editor:  Sean McMahon
Contributing Editor:  Jim Berard

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