India's central bank opts for modest rate cut | Bank of Japan says asset purchases could increase | Morgan Stanley analyst pairs Japanese stimulus, market spikes
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January 30, 2013
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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U.S. consumer confidence plunges; housing prices rise
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Reuters
U.S. consumer confidence this month reached its lowest ebb since November 2011, with January's Conference Board index registering 58.6, down from 66.7 in December. The rise in the payroll tax that took effect at the beginning of the year "has undoubtedly dampened consumers' spirits, and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock," said Conference Board economist Lynn Franco. In a positive sign, however, U.S. housing prices rose in November as inventories shrank. National Public Radio (1/29), Financial Times (tiered subscription model) (1/29)
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India's central bank opts for modest rate cut
As expected, the Reserve Bank of India reduced interest rates, chopping a quarter point in a move that won immediate praise from Indian industry. Meanwhile, the government's main economic adviser, C. Rangarajan, said more rate cuts could be in store if inflation doesn't pick up. Channel NewsAsia/Agence France-Presse (1/29), The Hindu (India)/Press Trust of India (1/29), LiveMint.com/The Wall Street Journal (India)/Reuters (1/29)
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Bank of Japan says asset purchases could increase
The Bank of Japan sees further scope for increasing asset purchases to boost the nation's economy beyond the ¥13 trillion a month it committed to beginning in 2014, according to minutes of last week's policy meeting. "From 2014, purchases will increase again. We'll examine the situation every month, so it's possible for purchases to increase further still," bank Governor Masaaki Shirakawa is quoted as saying. Reuters (1/29)
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Morgan Stanley analyst pairs Japanese stimulus, market spikes
Japan's periodic boosts in stimulative fiscal spending over the past 20 years have reliably produced market rallies, notes Morgan Stanley analyst Gerard Minack. Citing a chart of advances in the Nikkei preceded by spikes in government outlays, Minack says "it seems fair to say that fiscal policy has been more effective than many had expected through the current cycle." Business Insider (1/29)
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German consumers perk up; eurozone jobless rate is seen deepening
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Reuters
A lull in the eurozone storm apparently has lifted German consumer spirits, with the GfK sentiment index rising to 5.8 for February from an upwardly revised 5.7 a month before. The latest reading marks the first gain in four months. Meanwhile, however, a poll of economists projects higher unemployment across the eurozone, with an average of 11.9%. Reuters (1/29), The Business Times (Singapore) (1/29)
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U.S., RBS tussle over criminal charges
U.S. authorities are seeking a guilty plea from a unit of the Royal Bank of Scotland in connection with an overall settlement over Libor rigging, sources say. However, RBS is reported reluctant to accept the plea-agreement offer. The Wall Street Journal (tiered subscription model) (1/29)
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CFA Institute in the News
CFA Institute study proposes improvements in retail funds reporting in Asia Pacific
Over the past few years, private wealth in the Asia-Pacific region has grown, resulting in a myriad of investment product offerings for investors across the region. As the number of financial products increase, retail investors must decide which investments meet their financial objectives. A new research report from CFA Institute, Periodic Reporting for Retail Investment Funds in Asia Pacific — an Investor's Perspective, looks at existing regulations, disclosures, and periodic requirements for retail investment funds across six Asia-Pacific countries and provides suggestions on improvements to periodic reports.  Market Integrity Insights (1/16)
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
A reported rise in U.S. housing prices helped lift stocks Tuesday in Europe and the U.S., with European shares getting an additional boost from corporate earnings reports while U.S. gains were tempered by a lower reading for consumer confidence. The Stoxx Europe 600 rose 0.32% to 290.30, and the S&P 500 was up 0.51% at 1,507.84. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (1/30), Bloomberg Businessweek (1/29), CNNMoney (1/29)
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Asian shares advance
Asian shares were mostly higher Tuesday, with bank shares lifting Japan's Nikkei to a solid gain but another bank, Industrial & Commercial Bank of China, weighing on the market in Hong Kong as Goldman Sachs sold a large block of shares. The Nikkei rose 0.39% to 10,866.72, the Hang Seng edged down 0.07% to 23,655.17, the Kospi added 0.84% to 1,955.96 and the S&P/ASX jumped 1.11% to 4,889.00. MarketWatch (1/29)
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Economic Trends & Outlook
Chinese banks roll over debt for struggling local governments
Local governments in China that recently borrowed heavily to help stimulate the economy are now struggling with the debt, much of which Chinese banks are now rolling over. Financial Times (tiered subscription model) (1/29)
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Chinese banks' assets, liabilities rise
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Reuters
Total assets held by Chinese banks rose 17.7% in 2012 to 131.27 trillion yuan while liabilities were up 17.5% to 122.63 trillion yuan, according to the China Banking Regulatory Commission. Separately, Wang Yanxiu, head of the CBRC's novel-products department, warned banks of risks inherent in their popular wealth-management products, noting the commission will be carrying out checks of the products this year. Xinhuanet.com (China) (1/29), Xinhuanet.com (China) (1/29)
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Capital inflows are key in dealing with India's current-account gap
India's capital inflows have proved to be a useful tool in helping to counter the nation's persistently high current-account deficit, although it's important to encourage the right kind of inflow, said C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council. "Let us not make a demon out of capital flows. Capital flows have been useful and have contributed to the strengthening of the economy," Rangarajan said. The Economic Times (India) (1/29)
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South Korean industrial sentiment improves
Although sentiment remains well within the negative range, South Korean manufacturers' confidence has improved to a reading of 72 from 70 a month ago, while the index for non-manufacturers has bumped up to 70 from 68, the Bank of Korea reported. "Although timid, recovery is taking place. The pace of global economic recovery is also an uncertainty," said Oh Suk Tae, a Seoul-based economist at Standard Chartered Bank Korea. Bloomberg Businessweek (1/28)
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South Korean importers want government action as yen slides
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Reuters
Adding to evidence of turmoil stirred by Japan's aggressive monetary easing policy, the Korea Importers Association is lobbying the government to take action. "Yen's steep depreciation could prove useful for domestic prices and some companies to boost their competitiveness over a short term. But it is more crucial to bring the disrupted trade to order and help companies engage in management based on a stable outlook in a mid- to long-term," the association said in a statement. MK.co.kr (South Korea) (1/29)
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Australian business turns optimistic
Business confidence in Australia switched to positive in December from negative the month before with a lift from an interest-rate cut and a more positive outlook for the Chinese economy, according to the latest survey by National Australia Bank. The business-conditions index also improved but remained negative at minus 4 in a soft domestic climate. The Sydney Morning Herald (Australia) (1/29)
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Taiwan consumer confidence edges up after long decline
Consumer confidence in Taiwan has begun to pick up after four straight months of decline. "Overall, consumer confidence may continue to recover over the rest of the year, given that major research institutes have forecast that national GDP would grow more than 3%, or even 4%, this year," said Dachrahn Wu, director of National Central University's Research Center for Taiwan Economic Development, which carried out the consumer survey. The Taipei Times (Taiwan) (1/29)
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Philippine 2012 growth is expected to surprise on the upside
The Philippines probably exceeded the top end of the 5%-to-6% growth target for 2012 set by the government, President Benigno S.C. Aquino III said ahead of the official figures due today. For this year, however, the government says it will maintain its growth projection of 6% to 7%, citing lingering uncertainties in the global economy. Business World (Philippines) (1/29)
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Capital Markets & Financial Products
Qianhai loans test wider use of yuan
Fifteen lenders, including HSBC Holdings and Industrial & Commercial Bank of China (Asia), have taken advantage of the Qianhai area in Shenzhen to test a freer yuan, signing agreements to extend about 2 billion yuan of cross-border loans to companies in Qianhai. The district has been set up as a sort of "mini-Hong Kong" to test freer yuan use and capital account convertibility before the currency takes on a wider global role. China Daily (Beijing) (1/29)
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New rules to burden Asian companies borrowing abroad
Asian companies that find domestic markets lacking and look abroad for funding will be penalized under new Basel rules due to the lack of a clearinghouse for currency swaps. Financial Times (tiered subscription model) (1/29)
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Regulatory Update
Goldman reportedly sells part of ICBC stake
As expected, Goldman Sachs has reduced its stake in Industrial & Commercial Bank of China, raising US$1 billion in the process, sources say. It was the biggest share sale so far this year in Asia and reduced Goldman's ICBC stake to less than 5%. Caijing Magazine online (1/29)
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South Korean regulator targets former Shinhan chairman
Ra Eung-chan, former chairman of Shinhan Financial Group, is under scrutiny by South Korea's Financial Supervisory Service. The FSS is looking into whether Ra used more borrowed-name bank accounts than revealed about two years ago. The Korea Herald (Seoul) (1/29)
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