Obama confers with Dimon and Buffett about "fiscal cliff" | Manufacturing returns but without blue-collar jobs | India might allow greater foreign ownership of debt
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20 November 2012
CFA Institute: Financial NewsBrief
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China's overseas investment jumps 25.8%
During the first 10 months of this year, China's outbound direct investment increased 25.8% compared with the same period in 2011, the Ministry of Commerce said. Investors put $58.17 billion into 3,254 companies in 126 regions and countries, ministry spokesman Shen Danyang said. Xinhuanet.com (China) (20 Nov.), The Irish Times (Dublin) (20 Nov.), IndustryWeek/Agence France-Presse (19 Nov.)
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Obama confers with Dimon and Buffett about "fiscal cliff"
President Barack Obama consulted over the weekend with corporate leaders, including investor Warren Buffett and JPMorgan Chase CEO Jamie Dimon, about avoiding the U.S. "fiscal cliff." Both business leaders support the president's call to increase tax rates for the wealthy, but Dimon was critical about waiting so long to start talks about the fiscal cliff. Reuters (19 Nov.)
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Manufacturing returns but without blue-collar jobs
Manufacturing is growing fast in the U.S. and other major economies but the nature of factory work has changed and the number of traditional factory jobs has decreased, according to a study by the McKinsey Global Institute. Worldwide manufacturing contributed to 37% of productivity growth between 1995 and 2005, but employment fell 24% in that period, the study found. The Washington Post (tiered subscription model)/Wonkblog (19 Nov.)
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India might allow greater foreign ownership of debt
India's central bank is considering a proposal to increase the amount of government debt that foreigners can own from $10 billion to $15 billion, two Finance Ministry officials said. The Reserve Bank of India is also reviewing a proposal to raise the limit on foreign ownership of corporate debt from $20 billion to $25 billion, they said. Bloomberg (20 Nov.)
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Shareholders approve merger of Tokyo and Osaka exchanges
A $1.6 billion merger of Tokyo Stock Exchange Group and Osaka Securities Exchange was approved by shareholders. The government encouraged the deal to cope with falling equity volume in Japan, as trading moves to China. Bloomberg (19 Nov.), Xinhuanet.com (China) (20 Nov.)
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Analysis: Spain's financial woes reflect world's
Spain is a prime example of problems besetting the global economy; namely, too much debt that likely will never be repaid, Alen Mattich writes. Spain has €182 billion in bad loans, nearly 11% of its balance sheet. Until bondholders accept losses, the can will keep getting kicked down the road, Mattich notes. However, that cannot go on forever. A U.K. official noted that monetary policy will only put off, not prevent, painful and necessary restructuring. The Wall Street Journal (tiered subscription model)/The Euro Crisis blog (19 Nov.)
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Asian-Pacific market are mixed amid eurozone troubles
Asian-Pacific markets were mixed Tuesday as uncertainty over aid for Greece and the downgrade of France's bond rating rattled investors. South Korea's Kospi and Australia's S&P/ASX 200 each rose 0.6%. Taiwan's Taiex edged up 0.2%. Hong Kong's Hang Seng Index fell 0.2%. China's Shanghai Composite lost 0.4%. Japan's Nikkei 225 slid 0.1%. India's Sensex was down 0.1% at mid-afternoon. MarketWatch (20 Nov.), The Economic Times (India) (26 Feb.)
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Investors wade even deeper into dark pools, study finds
Nearly a third of U.S. equity-market volume is conducted on dark pools, according to research. The shift presents challenges for regulators. Financial Times (tiered subscription model) (19 Nov.)
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France loses AAA rating from Moody's
Moody's Investors Service downgraded France's government-debt rating one step, from AAA to Aa1. The credit rating agency cited the country's weak outlook for long-term growth, reduced competitiveness and inflexibility in labor, service and goods markets. Standard & Poor's downgraded France in January. France 24/Agence France-Presse (19 Nov.), Forbes (19 Nov.), CNBC (19 Nov.)
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Economics
Sales of existing U.S. homes increase
Sales of previously owned homes in the U.S. increased 11% last month compared with October 2011, the National Association of Realtors said. The inventory of unsold homes shrank to its smallest in a decade. The National Association of Home Builders/Wells Fargo index of builder sentiment this month shows that confidence is at its highest level in six years. Google/The Associated Press (19 Nov.), Bloomberg (19 Nov.), FuturesMag.com (19 Nov.)
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Big-box retailers go all out to win back Internet buyers
Major retailers are rolling out a wide range of promotions to avoid losing holiday sales to "showrooming," when shoppers visit stores to look at merchandise, then buy online. IDC Retail Insights surveyed shoppers and found that 20% intend to "showroom" this year, double last year's percentage. The Washington Post (tiered subscription model) (19 Nov.), Forbes/Great Speculations blog (19 Nov.)
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Japan readies $12.3B stimulus program
Japan aims to prevent recession by launching a $12.3 billion round of stimulus. Chief Cabinet Secretary Osamu Fujimura says the government will draw against reserves in this fiscal year's budget. Bloomberg (19 Nov.)
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Analysis: U.S. needs sensible pricing for energy
America's oil and gas bonanza, made possible by policy that encourages innovation, should be followed by rational pricing for energy, according to The Economist. "Tiny petrol taxes take no account of the damaging effects of pollution. ... The biggest bonanza from all this new energy would be if the users paid the real cost of consuming oil and gas," the magazine notes. The Economist (free content) (17 Nov.)
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Investors seek better alternative-investment reporting
Use of alternative investments is increasing, and financial advisers, as well as other entities offering investment guidance, are facing pressure to produce client statements more quickly and accurately and with more detail. One solution is for advisers to use a data-aggregation service. AdvisorOne (19 Nov.)
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Experts: Developed world overlooks Latin American boom
Latin America's economic growth routinely faces "benign neglect," leaving a wealth of investment opportunities on the table because the West is fixated on Asia, experts said at a Council on Foreign Relations conference. An expanding middle class and reduced poverty are increasing Latin America's economic stability, said Claudio Loser, former director of the International Monetary Fund's Western Hemisphere Department. MarketWatch/Medill News Service (19 Nov.), Council on Foreign Relations online (19 Nov.)
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Geopolitical/Regulatory
FSA might let retail banks sell certain derivatives
U.K. banks might end up peddling derivatives to small companies once their retail operations are ring fenced, Financial Services Authority Chairman Adair Turner said. That revelation is a reversal of an original proposal. "We can see some arguments why a relaxation might be legitimate and OK provided that it is wrapped around with some limits as to the scale of this book relative to the total scale of the balance sheet," Turner said. Reuters (19 Nov.)
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Banking rules might bolster offshore renminbi market
Chinese companies are likely to tap the bond market more often as implementation of Basel III further limits bank lending. As a result, the offshore renminbi market likely will see more variety and action. International Financial Law Review (15 Nov.)
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Foreign banks might exit U.S. because of Volcker rule
Foreign banks operating in the U.S., as with domestic banks, will be subject to the Volcker rule, which bars proprietary trading. Many of these foreign banks might leave the U.S. to avoid the added regulatory burden, their attorneys warned. International Financial Law Review (19 Nov.)
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Financial Products
Van Eck prepares hedged high-yield-bond ETF
Van Eck Global filed with the Securities and Exchange Commission to launch an exchange-traded fund focused on high-yield corporate bonds. The ETF would short U.S. Treasurys to hedge against a sharp increase in interest rates. The Market Vectors High Yield/Treasury Bond ETF would be linked to a proprietary index tracking below-investment-grade corporate debt, which must have a fixed coupon and one year left to maturity and be denominated in the U.S. dollar. IndexUniverse.com (19 Nov.)
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