Latest U.S. home sales data unexpectedly negative | U.S. says yuan undervalued but won't label China a manipulator | France's last triple-A credit rating on the line
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November 29, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Financial CEOs troop to White House to discuss budget talks
Blankfein/Reuters
Goldman Sachs chief Lloyd Blankfein and other financial CEOs were scheduled to meet Wednesday at the White House with President Barack Obama to go over their ideas on U.S. budget talks. The meetings followed the CEOs' earlier chats with Republican House Speaker John Boehner as markets and investors await word on whether Washington can manage to avoid automatic and harsh budget cuts and tax increases. "I am optimistic that we can continue to work together to avert this crisis sooner rather than later," Boehner said. Bloomberg (11/28)
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Latest U.S. home sales data unexpectedly negative
A shadow of doubt was cast over recent signs of recovery in the key U.S. housing market with an unexpected decline of 0.3% in October sales of new homes and a downward revision in September's numbers. Nonetheless, noting volatility in new-home sales data, "we are not changing our view that a modest recovery in home sales, construction activity and prices is well under way," said economists John Ryding and Conrad DeQuadros of RDQ Economics in New York. Bloomberg (11/28)
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U.S. says yuan undervalued but won't label China a manipulator
Reuters
The U.S. Treasury stopped short of labeling China a currency manipulator while saying the yuan is "significantly undervalued." The absence of a manipulator designation rules out the imposition of trade sanctions against China and might avoid souring relations between the two countries. Caijing Magazine online (11/28), The Wall Street Journal (tiered subscription model) (11/28)
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France's last triple-A credit rating on the line
France's last triple-A credit rating could be in jeopardy next year if its economy stalls and the country fails to meet budget targets, Fitch says. "We think it is challenging for France to hit its 3% deficit for 2013, particularly given its anemic growth prospects," said Tony Stringer, managing director of Fitch's sovereign rating group. The Economic Times (India)/Reuters (11/28)
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Spanish banks go under the knife as part of eurozone bailout
Reuters
Substantial belt-tightening is in store for four Spanish banks under conditions set for the country's eurozone rescue, according to the European Commission. Three of the banks, which have been nationalized, will see their balance sheets cut by more than half over five years while job cuts and losses for creditor bondholders are imposed. The fourth bank will be sold. Reuters (11/28)
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Eurozone lending declines again in October
The eurozone's latest recession kicked off with a 0.7% drop in private lending in October, extending a 0.9% decline in the previous month, the European Central Bank reported. "Despite the ECB's efforts to improve monetary-policy transmission, there are still wide differences in lending rates and many banks are still reluctant to extend credit given the recessionary environment," observed Thomas Costerg, an economist at Standard Chartered Bank in London. Bloomberg Businessweek (11/28)
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Barclays fires 5, punishes 8 after its own Libor probe
Five employees have been fired and eight more disciplined by Barclays after the bank's internal probe of Libor rigging. Rich Ricci, chief executive of corporate and investment banking, said that many others identified in the investigation had already left the bank and that Barclays had informed authorities. Reuters (11/28)
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INTERNATIONAL MARKETS OVERVIEW
European and U.S. stocks advanced Wednesday as investors focused on the latest indications for success in U.S. budget talks to avert a fiscal crisis. The Stoxx Europe 600 managed a 0.11% gain to 273.15, and the S&P 500 added 0.79% to 1,409.93. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/29), The Wall Street Journal (tiered subscription model) (11/28), CNNMoney (11/28)
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Asia stocks slide amid mounting concern on U.S. budget
Deepening worries over the consequences of failure in U.S. budget negotiations put a damper on stocks across Asia on Wednesday. The Nikkei fell 1.22% to 9,308.35, the Hang Seng dropped 0.62% to 21,708.98, the Kospi was down 0.65% at 1,912.78 and the S&P/ASX eased 0.21% to 4,447.30. Bloomberg Businessweek (11/28)
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Economic Trends & Outlook
U.S. says South Korean currency should be allowed to extend gains
The U.S. Treasury Department says the South Korean won is undervalued by as much as 10%. In a report, the department calls on South Korea to cease intervening in the currency markets as the won continues to gain ground against the dollar. MK.co.kr (South Korea) (11/28)
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South Korean business confidence at lowest ebb in nearly 4 years
Record household debt domestically and the twin overseas worries posed by a U.S. budget deadline and the eurozone crisis contributed to a decline in South Korean business confidence to a nearly four-year low. The Federation of Korean Industries' business index for December fell to 82, the lowest reading since the 76.1 registered for March 2009. The Korea Herald (Seoul) (11/28)
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Confident Thai central bank holds rate steady
Reuters
Citing strength at home and early indications of a global recovery, Thailand's central bank left its benchmark rate at 2.75%. Economists predicted a steady course on rates into the new year, barring an economic slump. The Business Times (Singapore) (11/28)
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Philippine economic growth accelerates unexpectedly
The Philippine economy apparently responded to recent central bank rate cuts with a surprisingly strong third quarter as GDP growth jumped to an annual 7.1%, improving on 6% growth in the previous quarter. "The Philippines is going to rock. The central bank and the government have made timely policy adjustments that are boosting trend growth," said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings, who predicted a steady rate course for the central bank. Bloomberg Businessweek (11/28)
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China seen loosening monetary policy cautiously in 2013
Reuters
Facing less pressure from inflation, China's central bank is likely to step forward with a looser monetary policy and lower interest rates in the new year, says Chen Dongqi, a senior researcher with China's top economic planner, the National Development and Reform Commission. But with some economists warning that major stimulus could lead to problems later in the year, Chen said caution is in order for any substantial changes in monetary or fiscal policy. AutomatedTrader.net/Dow Jones Newswires (11/28)
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Southeast Asia drawing major interest from insurers
With life insurance premiums across Southeast Asia projected to rise 6.6% next year to address demand from a growing middle class, insurance companies are rushing into the region, which offers considerably better prospects than more developed markets. Malaysia's AMMB Holdings, for instance, is expected to attract major global interest in its plans to sell a 30% stake in its life insurance unit. The Wall Street Journal (tiered subscription model) (11/28)
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Capital Markets & Financial Products
Japan bond yields plunge ahead of elections
Expectations of imminent central bank easing after next month's snap elections in Japan have thrust yields on the country's 10-year bonds to a nine-year low. "I expect to see 10-year yields drop below 0.7%. Everybody knows that the government and the central bank have to boost stimulus to exit deflation and weaken the yen," said Tetsuya Miura, chief market analyst at Mizuho Securities. Bloomberg Businessweek (11/28)
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Hong Kong IPO for China's PICC seen pricing low
Reuters
The Hong Kong initial public offering of People's Insurance Co. (Group) of China -- one of the largest globally this year -- is likely to price near the low end of its range, sources said. Investors cite the range itself, from HK$3.43 to HK$4.03, which means a valuation between 1.65 times and 1.86 times PICC's forecast 2012 embedded value. The Wall Street Journal (tiered subscription model) (11/28)
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Regulatory Update
Olam defiantly denies Muddy Waters allegations
Singapore-based commodity trader Olam International reacted vigorously to an attack from short seller Muddy Waters, defending its accounting and denying any danger of insolvency. "We have proactively planned for an appropriate capital structure and raised the requisite equity and debt to meet our investment plans," Olam said in a 45-page statement. The Wall Street Journal (tiered subscription model) (11/28), The Business Times (Singapore) (11/28)
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People & Personalities
Bo Kratz joins Northern Trust in Hong Kong post
Northern Trust has signed on Bo Kratz as managing director for asset management in the Asia-Pacific region excluding Japan. Kratz comes to the job from his Singapore post as Asia chief for U.S. alternative investment firm Permal. He will now be based in Hong Kong and head a team managing $50 billion in assets. AsianInvestor.net (11/28)
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