ECB keeps low rates steady | Greece now at selective default, S&P says | Eurozone integration proposals are modest
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December 7, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Investment schemes spark fear of trillions at stake in China
Fears have been ignited in China over the possibility of widespread Ponzi schemes that could amount to trillions of dollars. The focus is on so-called wealth management products, popular but unregulated vehicles that promise a certain rate of return and claim to invest in enterprises as diverse as auto companies and pawnshops. Police and regulators are investigating after investors in one such fund protested this week at a branch of Huaxia Bank in Shanghai. AsianInvestor.net (12/6)
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ECB keeps low rates steady
Keying on more favorable economic news and lower borrowing costs for troubled eurozone states, the European Central Bank kept its deposit rate at zero and the marginal lending facility at 1.5%. The calmer mood stems from bank President Mario Draghi's bond-buying pledge in September. That commitment remains untested, however, and "at some point in time, the ECB will have to prove that the new bond-buying program is more than only an illusionary giant," said Carsten Brzeski, senior economist at ING Bank. RTT News (12/6)
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Greece now at selective default, S&P says
Greece's recent debt-buyback auctions are equivalent to default, as reckoned by Standard & Poor's, which has now downgraded Greek debt from CCC to selective default. However, S&P held out the possibility that the Greek rating will be restored to CCC when the buyback is completed later this month. Separately, Greece reported its jobless rate rose to a record 26% in September. Xinhuanet.com (China) (12/6), Reuters (12/6)
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Eurozone integration proposals are modest
Van Rompuy/Reuters
Plans unveiled Thursday for closer ties in the eurozone revealed caution, apparently in deference to Berlin's concerns that German taxpayers might be stuck supporting their counterparts elsewhere in the zone. A single zonewide bank supervisor is urged, to be in place by 2014. But missing were expected proposals for a central fund to deal with economic shocks and a bank-deposit guarantee mechanism that would span the currency region. The Wall Street Journal (tiered subscription model) (12/6)
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Bank of England decides on no more quantitative easing for now
With the U.K. economy poised between growth and contraction and questions arising about the effectiveness of the Bank of England's quantitative easing, the central bank has decided not to extend the program. The BOE also decided to leave interest rates at the record-low 0.5%. BBC (12/6)
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European companies face difficult 2013, ratings agencies warn
Next year is shaping up as a rough one for a number of European companies as the pace of global growth continues to lag, according to Moody's and Standard & Poor's. Financial Times (tiered subscription model) (12/6)
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U.S. jobless benefit claims drop more than forecast
First-time claims for U.S. unemployment benefits fell a larger-than-expected 25,000 last week to 370,000, helped in part as effects of Hurricane Sandy ceased to be reflected in the data. "With this number, we are pretty much back to where we were before the hurricane. Layoffs are lingering at the same pace. Hiring remains relatively anemic," said Guy Berger, an economist at RBS Securities in Stamford, Conn. Bloomberg (12/6)
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Deutsche Bank is alleged to have hidden paper losses
Three former employees are telling U.S. regulators that Deutsche Bank failed to recognize as much as $12 billion in paper losses allegedly sustained during the financial crisis. Financial Times (tiered subscription model) (12/6)
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INTERNATIONAL MARKETS OVERVIEW
Investors in Europe keyed on strong German factory orders, and U.S. investors favored a strong tech sector as markets on both sides of the Atlantic scored modest gains Thursday. The Stoxx Europe 600 ended the day 0.69% higher at 278.82, and the S&P 500 rose 0.33% to 1,413.94. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (12/7), The Wall Street Journal (tiered subscription model) (12/6), CNNMoney (12/6)
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Japanese shares stand out as Asian markets drift
Japanese shares gained on expectations of economic stimulus, but stocks elsewhere in Asia searched for direction Thursday. The Nikkei rose 0.81% to 9,545.16, the Hang Seng edged down 0.09% to 22,249.81, the Kospi was up 0.13% to 1,949.62 and the S&P/ASX was down 0.25% at 4,509.30. MarketWatch (12/6)
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7 December 2012
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Economic Trends & Outlook
Poll points to weaker China exports in November
Reuters
Expectations of export-driven stabilization in China's economy might be shaken by November export data, as suggested in a Reuters poll. "In November, with the seasonal orders to the U.S. mostly completed and a less favorable base from last year, we expect much weaker export growth," said a recent note to clients from Shen Jianguang, China economist at Mizuho Securities in Hong Kong. The Business Times (Singapore) (12/6)
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South Korea to miss 2012 growth target after poor 3rd quarter
Third-quarter growth of only 0.1% ensures that South Korea will fall short of its earlier projected 2.4% GDP growth for the full year, the Bank of Korea says. The latest quarterly gain matched the low seen in the first quarter of 2009 during the worst months of the global financial crisis. The Korea Herald (Seoul) (12/6)
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Cooling Indian economy might soon get central bank help
Subbarao/Reuters
Noting a recent slackening in growth and looking ahead to low inflation in the final quarter, Reserve Bank of India Governor D. Subbarao suggested that looser monetary policy might be in store. Also taking into account the cooling economy and an accompanying rise in nonperforming assets, the RBI is asking banks to institute loan-recovery policies. The Hindu (India)/Press Trust of India (12/6), The Hindu (India) (12/6)
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Philippine growth is seen at 6.3% this year, staying strong in 2013
Philippine growth could be so strong in the new year that inflation picks up, prompting the central bank to tighten policy, Bank of America Merrill Lynch says in a report on Southeast Asia. The report projects 6.3% growth for the Philippines this year. Business World (Philippines) (12/6)
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Capital Markets & Financial Products
Building anticipation moves Japanese bond market
As the market anticipates imminent easing by the Bank of Japan and with new polls showing opposition Liberal Democratic Party leader Shinzo Abe likely to win elections, government bond yields plunged Thursday. "The market is thinking that if the LDP is able to gain a majority by itself, then it won't be constrained in applying pressure for more easing," said Akitoshi Masuda, executive portfolio manager at DIAM. The Wall Street Journal (tiered subscription model) (12/6)
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BNP offers custody stock trading in Asia
Investors soon will have the option of trading blue-chip stocks on the "international board" of the London and Singapore stock exchanges using a custody service from BNP Paribas. Financial Times (tiered subscription model) (12/6)
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Regulatory Update
South Korea opens door wider for big foreign companies to list
Large and secure foreign companies will have an easier time listing on the South Korea stock market after the Financial Services Commission lowered the bar for entry. "We will be flexible as much as possible in adopting policies to attract promising foreign companies within the boundary of the existing laws," an FSC official said. MK.co.kr (South Korea) (12/6)
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Taiwan regulator introduces measures to boost stock market
Intraday trading in which a stock can be bought and then sold in the same session is coming to Taiwan under a decision by the Financial Supervisory Commission. The FSC is also working with the Taiwan Stock Exchange to reduce fees for securities dealers. Both actions are intended to stimulate the market. China Economic News Service (Taiwan) (12/6)
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Ethics & Standards
HSBC's U.S. fine is reported to be US$1.8 billion
Reuters
Sources say HSBC will pay US$1.8 billion as part of its settlement with U.S. authorities in a money-laundering scandal. The full nature of the final resolution of the case is seen as a signal to other banks of how seriously the U.S. intends on act on future cases of illicit money movements. The Business Times (Singapore) (12/6)
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StanChart to pay additional penalty in Iran sanctions case
After paying US$340 million in penalties to New York state regulators last quarter, Standard Chartered now expects to pay nearly that much again -- US$330 million -- to U.S. federal regulators over the bank's noncompliance with sanctions against Iran. The penalty will lower StanChart's 2012 result, which nonetheless is expected to be a record for the 10th year running. The Economic Times (India)/Reuters (12/6)
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