Hurricane's economic damage is seen as short-term | China nonmanufacturing accelerates; DBS sees slowdown ending | No stimulus is expected after U.K. economy shows signs of life
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November 5, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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U.S. jobless picture: More of the same
Reuters
The U.S. labor market's gain of 171,000 jobs last week with an uptick in the unemployment rate to 7.9% gave mixed signals on the U.S. economy. Economists say growth is sustained enough at a low rate to adds jobs overall but is well below the kind of growth, at 250,000-plus jobs per month, that would make a significant difference. United Press International (11/4), The Wall Street Journal (tiered subscription model) (11/2)
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Hurricane's economic damage is seen as short-term
Despite the massive damage left by Hurricane Sandy along the U.S. East Coast, the effects on the national economy are not expected to last long. The interruptions, however, are likely to skew business activity in the short term and throw off this week's jobless-benefit numbers, although other government reports will be unaffected. MarketWatch (11/4)
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China nonmanufacturing accelerates; DBS sees slowdown ending
China's purchasing managers' index for nonmanufacturing industries jumped to 55.5 in October from 53.7 the previous month, adding to indications that the economy is pulling out of a seven-quarter slow period. Separately, the head of Singapore banking giant DBS said "the worst is behind us" in China's slowdown. Business Insider (11/4), Financial Times (tiered subscription model) (11/4)
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No stimulus is expected after U.K. economy shows signs of life
Reuters
The Bank of England is expected to forgo any further stimulus this week after unexpectedly strong growth that pulled the country out of recession in the third quarter. Meanwhile, the National Institute for Economic and Social Research revised its 2012 forecast for the U.K. economy, projecting a 0.1% contraction rather than the steeper pullback previously predicted. The Independent (London) (tiered subscription model) (11/4), Xinhuanet.com (China) (11/2)
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G20 frets over U.S. "fiscal cliff"
Group of 20 finance ministers gathered in Mexico focused on the "fiscal cliff" in the U.S. and the prospect that severe automatic budget cuts could hurl the country back into recession. "The U.S. administration says it doesn't want to fall off the fiscal cliff, but right now it can't tell us how exactly it will address it because that issue is on ice ahead of the election," one G20 official said. The Economic Times (India) (11/4)
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Japan's parties avoid budget disaster with talks raising debt ceiling
Noda/Reuters
Japan's impending budget crisis got a measure of relief as major parties agreed to launch discussions over raising the nation's debt ceiling. The holdup had been the insistence of Liberal Democrats that the prime minister schedule snap elections, and that issue remains up in the air. The Wall Street Journal (tiered subscription model) (11/4)
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Penalties for Libor rigging may have a long way to go
The US$435 million fine levied against Barclays Bank for Libor fixing may be a taste of much more to come for other banks and entities that may have engaged in similar manipulations. Estimates now range as high as US$200 billion industrywide, although settlements are likely in many cases, bringing the final total down. The Business Times (Singapore) (11/3)
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
Shares across Europe enjoyed an upbeat week, buoyed by the reopening of U.S. markets after Hurricane Sandy, good corporate earnings and U.S. jobs data interpreted as positive. On Friday, the Stoxx Europe 600 rose 0.42% to 274.85, ending the week up 1.6%. The U.S. market, however, turned down Friday as an initial lift from the jobs report for October gave way to rising worries over prospects for avoiding automatic spending cuts and tax increases after Tuesday's elections. The S&P 500 fell 0.94% to 1,414.20. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/5), Bloomberg (11/2), CNNMoney (11/2)
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Asia stocks end strong week on an up note
With several signs in the U.S. economy pointing up, shares across Asia had a generally positive week, anticipating a pickup in global export demand. The gains extended into Friday, with the Nikkei rising 1.17% to 9,051.22, the Hang Seng surging 1.33% to 22,111.33, the Kospi adding 1.07% to 1,918.72 and the S&P/ASX edging up 0.06% to 4,460.10. Bloomberg (11/3)
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Economic Trends & Outlook
India's Congress party rallies for retail FDI
Reuters
India's Congress party sought to dispel public anger and skepticism over the government's huge opening of the retail sector to foreign direct investment. At a rally of about 50,000, party leader Sonia Gandhi declared that "FDI in retail will not only benefit farmers but also unemployed youth and the common man." Opponents, however, say the new investment stands to destroy millions of jobs and ultimately lead to lower crop prices. Reuters (11/4)
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South Korea corporate mergers up sharply in tough times
South Korean corporate mergers are up more than half so far this year from the corresponding period last year, a phenomenon attributed to companies hunkering down in challenging times. "The number of corporate mergers is expected to increase in the coming year as many firms are struggling to restructure their operations," predicted Jang Hu-seok, an economist at Hyundai Research Institute. The Korea Herald (Seoul)/Yonhap News Agency (11/4)
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Loan delinquency, total debt climb in South Korea
Debt delinquency among South Korean corporations was up significantly in the third quarter from a year before, according to one major bank. Meanwhile, the country's total private and public sector debt reached 2,962 trillion won as of the end of June, equivalent to a worrisome 233.8% of nominal GDP. MK.co.kr (South Korea) (11/2), The Korea Herald (Seoul) (11/4)
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Deloitte: No Australian budget surplus in sight
With Australian government revenues subject to a high degree of volatility, the government's pledge to deliver a budget surplus before elections next year is unrealistic, says Deloitte Access Economics. "It's too easy to see those [projected] surpluses melt amid relatively small shifts in the economy," said Deloitte's Chris Richardson, a former Australian Treasury economist. Bloomberg Businessweek (11/4)
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Eurozone tops agenda at Asia-Europe summit in Laos
Reuters
A summit assembling dignitaries from 49 Asia-Pacific and European nations opens today in Laos. Events in Europe, specifically the unresolved eurozone debt crisis, will occupy the top of the agenda. The Wall Street Journal (tiered subscription model) (11/4)
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Philippines' bright economic prospects also a problem
The Philippines' newly enhanced status as a leading investment spot in Asia is a two-edged sword, with fears growing that the nation can now expect an inflow of hot money in the wake of the U.S. Federal Reserve's quantitative easing. The Philippine central bank has lowered interest rates to stem the tide, but more may be needed. Business World (Philippines) (11/4)
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Capital Markets & Financial Products
China's RQFII program to be expanded
Expanding on a program launched nearly a year ago, the China Securities Regulatory Commission is drawing up new rules for its Renminbi Qualified Foreign Institutional Investor plan. The program currently allows up to 70 billion yuan in exchange-traded funds raised offshore to be invested in the domestic capital market. The new rules would also ease the way for mainland businesses to go public in Hong Kong. Xinhuanet.com (China) (11/2)
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Regulatory Update
Mitsubishi UFJ is reported ready to acquire all of brokerage
Reuters
A Tokyo-based securities firm serving wealthy clients that has been a joint project of Mitsubishi UFJ Financial Group and Bank of America is reported likely to become a wholly owned unit of the Japanese firm as it seeks to build its domestic business. Mitsubishi UFJ Merrill Lynch PB Securities is currently 51%-owned by Mitsubishi UFJ Financial, which is said to be planning to acquire the remainder for about 40 billion yen. The Yomiuri Shimbun (Japan) (11/4)
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South Korean regulator examines wild ride in small caps
A surge of South Korean investment into smaller companies keyed to upcoming elections has produced huge price fluctuations and attracted regulatory scrutiny. Financial Times (tiered subscription model) (11/4)
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Ethics & Standards
20 South Korean brokerages are penalized in bond rate fixing
South Korean authorities have fined 20 local brokerages in connection with manipulating bond rates submitted to the Korea Exchange for repurchasing the bonds offered for sale by the public. Further investigations and possible penalties are in store for six of the brokerages. Yonhap News Agency (South Korea) (subscription required) (11/4)
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