Asian leaders see continued focus on region under Obama | U.S. election boosts rupee | China's Communists gather to pick new slate of leaders
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November 8, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Obama's re-election shifts focus to struggling economy
Reuters
With his re-election Tuesday, U.S. President Barack Obama will immediately confront an economy hobbled by uncertainty and slow growth. Markets and the U.S. dollar turned down on news of the election outcome as the focus shifted to the upcoming "fiscal cliff" of automatic budget cuts that could push the economy back into recession. Meanwhile, an expert at Bank of America Merrill Lynch predicts only 1% U.S. growth for the fourth quarter. The Wall Street Journal (tiered subscription model) (11/7), Xinhuanet.com (China) (11/7)
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Asian leaders see continued focus on region under Obama
Asian leaders anticipate a continued U.S. focus on the region with the re-election of President Barack Obama, although China-bashing was a central theme for both candidates. Chinese officials were quick to congratulate Obama on his victory, and Foreign Ministry spokesman Hong Lei said China "is willing to work together with the U.S. to focus on the future, to continue its efforts to promote the Sino-U.S. partnership to achieve new and greater development." The Wall Street Journal (tiered subscription model) (11/7)
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U.S. election boosts rupee
The rupee was up for a second day in the wake of the U.S. election, ending a six-week slump. Experts say the re-election of U.S. President Barack Obama means the Federal Reserve is likely to continue its quantitative easing program, ensuring dollar liquidity and making risk assets more attractive to investors. The Economic Times (India)/Reuters (11/7)
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China's Communists gather to pick new slate of leaders
Reuters
A reform agenda was on the line as China's Communist Party assembled in Beijing for the fifth installment in a continuous line of leaders since 1949. Expected changes include breaking up state-owned monopolies, deregulating lending rates and correcting underpricing of natural resources. "The past 10 years, the economy has benefited from changes made in previous periods," said Ding Shuang, senior economist for China at Citigroup in Hong Kong. "Now those dividends are used up." Bloomberg (11/7)
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Economists agree Japan's economy shrank in 3rd quarter
Surveyed economists conclude that Japan's economy shrank in the third quarter, battered by a plunge in exports and subdued domestic demand. The annualized median figure for contraction was pegged at 3.9%. "It is highly likely that people will get a renewed sense that Japan is in a recessionary phase," said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. The Wall Street Journal (tiered subscription model) (11/7)
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European Commission sees modest growth for U.K. in 2013
Britain's economy is likely to grow 0.9% next year after a 0.3% contraction this year, the European Commission predicts. The anemic 2013 growth, however, is an improvement on the 0.1% forecast for the still-struggling eurozone. The Guardian (London) (11/7), The Telegraph (London) (tiered subscription model) (11/7)
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Economic advisers see tepid German growth, urge budget restraint
A panel of independent economic advisers forecast just 0.8% growth for the German economy next year and urged the government to exercise more discipline over the budget. Chancellor Angela Merkel has proposed an increase in social welfare spending, saying the country remains on track for a nearly balanced budget by 2014. The Washington Post (tiered subscription model)/The Associated Press (11/7)
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France is expected to miss budget target in 2013
Hollande/Reuters
With likely growth of just 0.4% in 2013, France will miss its target of restraining the nation's budget deficit to 3% of gross domestic product, the European Commission says. "After three quarters of stagnating GDP and historically low levels of corporate profitability, prospects for an imminent recovery have waned. Specific downward risks relating to the French economy weigh on the potential recovery," the commission's report said. Reuters (11/7)
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Spain's industrial decline accelerates
Spain's industrial output dropped 7% in September from a year before, extending the string of monthly declines to 13. It was the sharpest pullback since April and doubled the forecasts of economists. Bloomberg Businessweek (11/7)
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
The prospect of political difficulty in confronting the self-imposed U.S. "fiscal cliff" occupied investors' minds Wednesday in Europe and the U.S. after the re-election of President Barack Obama, pushing stocks sharply lower on both sides of the Atlantic. The Stoxx Europe 600 dropped 1.35% to 271.04, and the S&P 500 plunged 2.37% to 1,394.53 as the Dow Jones Industrials closed below 13,000 for the first time in three months. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/8), Bloomberg (11/7), CNNMoney (11/7)
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Asian shares rise on U.S. election outcome
Asian stocks got a lift Wednesday as it became apparent that U.S. President Barack Obama had won a second term in office. The Hang Seng rose 0.71% to 22,099.85, the Kospi added 0.49% to 1,937.55, the S&P/ASX was up 0.71% to 4,516.50, while the Nikkei was flat at 8,972.89. Bloomberg Businessweek (11/7)
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Economic Trends & Outlook
Barclays sees modest improvement in China economy
China's consumer inflation and producer deflation will moderate while domestic economic activity picks up a bit in the near term, Barclays predicts. "We forecast that CPI inflation will edge up to 2% in October on flat food inflation and a slight pickup in nonfood inflation," said Chang Jian, an economist with Barclays. China Daily (Beijing) (11/7)
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China leads world with corporate debt at 151% of GDP
China has the world's biggest ratio of corporate debt to gross domestic product at 151%, about twice the proportion for the U.S., according to Zero Hedge. Hong Kong with 141% and Singapore at 133% are next in line with what Zero Hedge describes as credit bubbles. Caijing Magazine online (11/7)
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South Korean companies are expected to see falloff in earnings
Reuters
South Korea's listed companies are expected to post a nearly 5% decline in profit for the final quarter from the preceding quarter, according to financial information provider FnGuide. However, 55% of companies are likely to see improved results. MK.co.kr (South Korea) (11/7)
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Australia's central bank might be tamping down currency
Australia's central bank might be taking steps to hold down the value of the nation's currency. As evidence, foreign central banks' deposits at the Reserve Bank of Australia have nearly doubled to more than AU$2 billion in the past three months while the RBA has boosted its foreign exchange reserves by about the same amount. The Sydney Morning Herald (Australia) (11/7)
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Regulatory Update
HSBC plans sale of U.S. loans
Reuters
In a bid to rid itself of troubled loans, HSBC plans the sale of more than $6 billion in U.S. mortgages and other personal loans. Separately, an Irish fund says HSBC Holdings failed in its custodial duties involving assets ultimately invested with Bernard Madoff. Reuters (11/7), Bloomberg (11/7)
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Reforms are urged for South Korea's dual financial watchdogs
Reforms are being urged for South Korea's two main financial regulators -- one public, the other private -- as critics note overlapping duties that sometimes lead to conflict given the public watchdog's second role of policymaking. "The major problem of our financial regulatory system is that the [government's Financial Services Commission] handles both policymaking and supervisory work. Only Japan and we have such a system," said Kim Hong-ki, a law professor at Yonsei University. Yonhap News Agency (South Korea) (subscription required) (11/7)
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People & Personalities
HSBC names Tony Cripps head of Australian operations
Tony Cripps, head of HSBC's Philippines operations, has been tapped to lead the bank's operations in Australia. He succeeds Paulo Maia, who assumes a similar role for HSBC in Canada. The Sydney Morning Herald (Australia) (11/7)
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