Double-digit U.S. unemployment seen if no deal is reached | As China's holdings diminish, others dive in to U.S. Treasurys | Bundesbank projects sluggish global economy weighing on Germany
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November 20, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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More indicators point to U.S. housing comeback
Reuters
Two more signs of a nascent recovery in U.S. housing emerged, with sales of existing homes rising 2.1% in October and an index of homebuilder sentiment registering a six-year high. "The housing market is continuing to improve. It's probably improving more than most economists were projecting earlier this year," said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass. Reuters (11/19)
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Double-digit U.S. unemployment seen if no deal is reached
The U.S. jobless rate could be pushed above 10% if the president and Congress fail to reach a fiscal compromise, Fitch warns, although the ratings agency said it was optimistic that lawmakers could avoid such a scenario. Meanwhile, with or without a deal, some of the biggest U.S. companies say they're scaling back capital expenditure plans in the biggest such pullback since the recession, according to a Wall Street Journal review. Reuters (11/19), The Wall Street Journal (tiered subscription model) (11/19)
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As China's holdings diminish, others dive in to U.S. Treasurys
Although China's ownership of U.S. Treasurys has fallen by $123 billion since August of last year, more than twice that amount has been acquired by several other nations and entities, including Taiwan and Hong Kong, according to the Treasury. "Despite our fiscal situation, despite all these issues, there hasn't been much of a buyers' strike from the Treasury's perspective," said Aaron Kohli, an interest-rate strategist at BNP Paribas in New York. Bloomberg (11/19)
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Bundesbank projects sluggish global economy weighing on Germany
Reuters
The German economy is less likely to escape the ongoing effects of the eurozone crisis and global slowdown as the year draws to an end, the Bundesbank projects. "The economy currently presents a mixed picture, which is likely to cool further towards year-end. By now it has become unmistakable that the disturbing external factors are affecting the willingness to invest and job planning so strongly that the whole economy could be affected," the central bank concludes in a report. Reuters (11/19)
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U.S. Fed adds to Asia risk outlook for U.S. banks
China has been added to the eurozone, the U.K. and Japan as areas of concern for substantial weakening in the U.S. Federal Reserve's stress-testing of U.S. banks. Citibank in particular has a large exposure in the region. The Business Times (Singapore) (11/19)
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Obama visits Myanmar, Cambodia
Suu Kyi, Obama/Reuters
President Barack Obama visited Myanmar and Cambodia, calling in both countries for progress toward greater civilian control and respect for human rights. The visit has been accompanied by greater U.S. economic opening to Myanmar, although the manufacturing industries the country needs to build its economy have been slow in responding. The Wall Street Journal (tiered subscription model) (11/19)
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Report calls for focused oversight of shadow banking
Even though it's widely blamed for its role in the financial meltdown, the shadow banking industry grew to a record $67 trillion last year, according to a report by the Financial Stability Board. The report calls for greater oversight, noting currently lax regulation and saying that "authorities' approach to shadow banking has to be a targeted one." Reuters (11/19)
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INTERNATIONAL MARKETS OVERVIEW
Stock markets in Europe and the U.S. recorded their best single-day gains in months, lifted by assurances from President Barack Obama that negotiations will enable the U.S. to avoid the "fiscal cliff." The Stoxx Europe 600 surged 2.18% to 268.58, and the S&P 500 jumped 1.99% to close at 1,386.89. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/20), Bloomberg (11/19), CNNMoney (11/19)
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Budget optimism in U.S. buoys Asian markets
White House assurances that there's a budget deal in sight that would let the U.S. avoid the dreaded "fiscal cliff" helped lift shares across Asia on Monday. The Nikkei surged 1.43% to 9,153.20, the Hang Seng added 0.49% to 21,262.06, the Kospi rose 0.93% to 1,878.10, and the S&P/ASX was up 0.57% at 4,361.40. Bloomberg (11/19)
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Economic Trends & Outlook
Corporate insolvency up, household credit down in South Korea
Reuters
Corporate insolvency in South Korea rose to a 16-month high in October, the central bank reported, noting a shortage of liquidity in the country's lengthy economic slump. Meanwhile, the Korea Credit Bureau reported that households' credit soundness edged below a baseline of 100 in an extension of a steady three years of decline. MK.co.kr (South Korea) (11/19), MK.co.kr (South Korea) (11/19)
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Chances for Bank of Japan stimulus good if new party wins power
With the prospect of a new party in power after next month's elections, the chances for more stimulus by the bank of Japan are growing, observers say. "It looks like we'll have a clear five majority votes for more BOJ action and that's a change we haven't seen in years. BOJ policy will become more Bernanke-like in that it will be more aggressive and less focused on side effects," said Kazuhiko Ogata, chief economist at Credit Agricole. Bloomberg Businessweek (11/19)
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OECD projects solid growth across Southeast Asia
Thanks largely to the willingness of policymakers across Southeast Asia to step in as needed, economies across the region are poised for strong growth over the next few years, the Organization for Economic Cooperation and Development concludes. Indonesia should see the fastest annual growth in the region, averaging 6.4% annually, the OECD said. Bloomberg Businessweek (11/18)
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India vows free-trade accord with ASEAN
Singh/Reuters
India will conclude a free-trade agreement for services and investment with the Association of Southeast Asian Nations before leaders from the 10 ASEAN nations gather next month in New Delhi, Prime Minister Manmohan Singh promised. "This will be a strong signal of our deepening economic engagement and will allow for rapid expansion in trade and investment flows in both directions," Singh said at the ASEAN meeting in Cambodia. The Hindu (India) (11/19)
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Thai growth wanes, but outlook is good
Thailand's year-on-year GDP growth fell to 3% in the third quarter from 4.4% in the second quarter due to export sluggishness and lower demand from China and the U.S. However, the government and central bank have been stepping in, "boosting household incomes, and that will certainly support private consumption," noted Matthew Circosta, an economist at Moody's Analytics in Sydney. Circosta also said a healthier global economy should revive exports in the coming year. Bloomberg Businessweek (11/18)
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Capital Markets & Financial Products
China's sunshine funds target global investors through Hong Kong
Reuters
China's equivalent of hedge funds are eyeing access to global investors as they contemplate opening offices in Hong Kong. Many of these sunshine private-trust funds are "focusing very much on raising capital from offshore, and all have significant ambitions for alternative investments," one source said. AsianInvestor.net (11/19)
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Taiwan state funds barred from small-cap stocks
After a regulatory finding that managers of four government funds may have engaged in illegal trading, Taiwan is barring state fund managers from buying small-cap stocks, officials said. Bureau of Labor Insurance deputy manager Luo Wu-hu said the ban seeks to avert stock price manipulation. The Taipei Times (Taiwan) (11/20)
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Regulatory Update
HSBC discusses sale of Ping An shares
HSBC Holdings' $9 billion stake in China's second-largest insurer, Ping An Insurance, is on the block. HSBC confirms it "is in discussions which may or may not lead to the sale of the shares." Bloomberg (11/19)
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In sluggish market, Chinese securities firms get regulatory relief
With an eye to the struggling stock market, China extended a hand to securities firms, lowering capital-reserve requirements and widening the field of financial products they're permitted to invest in. Among other things, the margin-trading reserve level has been cut to 5%, down from 10%. The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (11/19)
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