Prospect of releveraging bodes well for U.S. economy | Report likens South Korea to Japan as it entered long downturn | With crisis worsening, Japan plans a third round of stimulus
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November 19, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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As U.S. leaders prepare to talk, no "fiscal cliff" resolution in sight
Geithner, Boehner, Obama, Reid/Reuters
Ahead of talks between congressional leaders and the White House this week, the administration is indicating that any resolution of the "fiscal cliff" is "not near the finish line, by any means," as the White House press secretary put it. On Friday, key House and Senate leaders discussed a framework plan presented by House Speaker John Boehner that Boehner said includes tax reforms and spending cuts. At stake is whether the U.S. avoids the automatic, sudden austerity shock of tax boosts and budget cuts at the dawn of the new year. Reuters (11/17)
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Prospect of releveraging bodes well for U.S. economy
Deleveraging an overhang of debt in the U.S. private sector has been the order of the day for several years. But now signs are emerging that the economy has reached the point that a gradual releveraging may be in store, promising to generate a "balance sheet recovery." Business Insider (11/17)
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Report likens South Korea to Japan as it entered long downturn
Many of the factors that led to Japan's prolonged downturn that began in the 1990s are at work in the South Korean economy, including an aging population, heavy household debt and diminishing consumption, concludes a report by the LG Economic Research Institute. Separately, the country's biggest corporations are cutting costs as politicians pledge a more level playing ground for small companies and export demand continues to suffer in a sluggish world economy. Maeil Business Newspaper (South Korea) (11/18), The Korea Herald (Seoul) (11/18)
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With crisis worsening, Japan plans a third round of stimulus
Noda/Reuters
A third round of stimulus has been ordered for Japan, with Prime Minister Yoshihiko Noda noting that the country's economy faces a rapidly deepening crisis. The new measure will follow a stimulus of ¥940 billion planned for the end of the month that will be directed toward further recovery efforts from the March 2011 earthquake and tsunami. The Yomiuri Shimbun (Japan)/Jiji Press (Japan) (11/17)
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Eurozone panic eases into prospect of prolonged gloom
An array of factors including persistence with austerity measures, beleaguered and frightened consumers, and tough lending standards by banks are dimming any prospects for European recovery, even as market fidgets over the immediate implications of the eurozone crisis have eased for the time being. Record unemployment only compounds the problem as the region looks set for a period of little or no growth. The Boston Globe (tiered subscription model)/The Associated Press (11/17)
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Bank of England official says more stimulus available if needed
The Bank of England has "not run out of ammunition" to combat the U.K.'s economic slowdown, says bank policymaker David Miles. "If it turns out that not enough has been done, that the economy's going to stay in a recessionary state and that's going to drive inflation down, there is more we can do," Miles said, noting that the central bank's current Funding for Lending program should provide some benefit heading into 2013. Bloomberg Businessweek (11/18)
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Parts of Asia find relief from global downturn in domestic markets
Parts of Asia, notably Malaysia and Hong Kong, are weathering the decline in export demand due to the global downturn with vibrant domestic markets. In Malaysia, active government intervention is boosting consumer confidence and spending, while Hong Kong has been buoyed by its close links to mainland China. The Wall Street Journal (tiered subscription model) (11/18)
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JPMorgan, Credit Suisse in deal with SEC over misleading of investors
U.S. charges of misleading investors over mortgage-related securities have been settled by JPMorgan Chase and Credit Suisse Group for $417 million. JPMorgan's $296.9 million portion of the settlement is the latest major penalty for the bank in a series stemming from the housing-bubble fiasco. Bloomberg (11/16)
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INTERNATIONAL MARKETS OVERVIEW
After a weekly drop of 1.45% in the S&P 500, U.S. investors will be watching a number of events this week, including the Gaza conflict, talks on the "fiscal cliff" and clues from the Federal Reserve on the future of quantitative easing. On Friday, the S&P 500 ended 0.48% higher at 1,359.88 on early indications of good intentions regarding the impending "fiscal cliff." The Stoxx Europe 600 fell 1% to 262.86 as investors focused on Mideast violence. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/19), Forbes (11/18), The Wall Street Journal (tiered subscription model) (11/16), CNNMoney (11/16)
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China speculation tempers Asian shares as Japan's Nikkei surges
Anxieties over China's new leadership kept a lid on most Asian shares Friday, while election speculation in Japan and the prospect of more economic stimulus from a new government boosted shares there. The Nikkei jumped 2.20% to 9,024.16, while the Hang Seng edged up 0.24% to 21,159.01, the Kospi lost 0.53% to 1,860.83, and the S&P/ASX was down 0.29% to 4,336.85. Bloomberg Businessweek (11/16)
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Economic Trends & Outlook
Huge free-trade area likely product of ASEAN summit
The world's largest free-trade area is expected to be the main result of this week's meeting of leaders of the 10-member Association of Southeast Asian Nations in Cambodia. The new grouping would also include six major partner nations -- China, Japan, South Korea, India, Australia and New Zealand -- and account for as much as $20.7 trillion in total trade. The Business Times (Singapore) (11/17)
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Obama's Myanmar trip also a bid to boost U.S. influence in Asia
Reuters
The U.S. shift in strategic attention to Asia is reflected in President Barack Obama's planned visit this week to Myanmar less than two weeks after his re-election. In Myanmar, the president will seek to bolster democratic reform while also cementing economic ties in the region and reasserting U.S. influence against a similar outreach by China. The Wall Street Journal (tiered subscription model) (11/16)
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China house prices mostly steady in latest reading
Fears of a renewed real estate bubble in China were eased somewhat by the latest government assessment of prices in 70 cities, showing essentially no price gains in October. The flat pricing held despite a pickup in transactions. The Wall Street Journal (tiered subscription model) (11/18)
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Taiwan rates seen holding steady; single sovereign fund is proposed
Anticipating economic recovery, Taiwan's central bank is likely to leave interest rates unchanged at its next meeting, Australia and New Zealand Banking Group predicts. Separately, in the hope of achieving stronger and more consistent results, Taiwan's Ministry of Finance is proposing to integrate the country's four major public funds into a single Taiwan sovereign fund. The Taipei Times (Taiwan) (11/19), China Economic News Service (Taiwan) (11/16)
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Singapore non-oil exports surge, but growth forecast is lowered
Singapore recorded a surprising 7.9% surge in non-oil exports for October year-on-year, although the total was down 1.2% from September. The Ministry of Trade and Industry predicted export growth for the year would be at the lower end of its earlier forecast of 1.5% to 2.5%, if not less. The Business Times (Singapore) (11/17), The Business Times (Singapore) (11/17)
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OECD, IMF see promising growth for Philippines
Lagarde/Reuters
The Organization for Economic Cooperation and Development says the Philippines is likely to meet growth targets for the year, and the International Monetary Fund notes that the country is the only one for which the fund has raised its growth outlook. Meanwhile, the Philippine central bank is predicting foreign direct investment will pick up after a downturn in August. Xinhuanet.com (China) (11/17), Business World (Philippines) (11/18), Business World (Philippines) (11/18)
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Capital Markets & Financial Products
Yuan convertibility coming, central bank governor says
Building on Communist Party pledges to allow for freer movement of capital, the next stage in China's revamp of its exchange system will be "reform of convertibility" for the yuan, said central bank Governor Zhou Xiaochuan. "We are going to realize it; we are moving in this direction; we need to go further; we will have some deregulation," Zhou said. Bloomberg (11/18)
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IMF says Australia's big 4 banks should hold more capital
The sheer size of Australia's four leading banks suggests they would be in line for a government bailout should they encounter difficulties, the International Monetary Fund says. Therefore, they should be required to hold more capital, the fund advised, even as it pronounced the country's overall financial system "sound, resilient and well managed." The Sydney Morning Herald (Australia) (11/17)
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