Investment Options Asia

A Bull in a China-Euro Shop?

April 18, 2011 by Tian Tan

How China Feels About European Investments

It’s nice that China Investment Corp (CIC) is in a good place financially, but it might be best advised to not put all its eggs in one basket. Established a mere four years ago to invest China’s foreign exchange reserves wisely, the multi-billion wealth fund (with estimated assets as of $532 billion as of two years ago) is seeking potential investment opportunities in Europe but is somewhat realistic about the area’s problems. This would make sense since just over 20 percent of its equity investments have been going into Europe.

Nonetheless, since the CIC has already had significant exposure to Europe, one would think it would be a little more cautious as things stand. Apparently not. Even though sentiment remains somewhat less than optimistic, plans may still forge ahead especially in the infrastructure sectors.

Global Economy

The Boao assembly where these issues were discussed is a gathering of government, business and academic leaders to “discuss pressing issues in the region and the rest of the world.” In recent times, China has been purchasing foreign currencies that are put towards its exports as a way of controlling the yuan value. In general they are put into sturdy US Treasury bonds but given the global economic fiasco, the CIC has been making efforts to “be more aggressive to improve returns.”

CIC and Asia Exporters

According to Asia’s largest thermal coal exporter Bumi Resources, talks were being held with CIC about the possible “swap of $600 million debt into equity” but this would obviously require the total support of CIC, according to Kenneth P. Farrell, the company’s director and CEO of Bumi Resources Minerals.

Nonetheless, the main priority of Bumi is to “repay a first tranche of $600 million in debt this October — two years earlier than scheduled — out of a total $1.9 billion it owes to China's sovereign wealth fund.

Global Financial System Reform?

April 14, 2011 by Tian Tan

BRIC Leaders Meeting

BRIC nation leaders (Brazil, Russia, India and China) are meeting up in China for a one day conference. BRIC is actually a bit of an inaccurate description now (it should really be changed to BRICS) since South Africa recently joined. As a unit they have both economic and political influence today, and also form part of the G20. The topic to be addressed will be reforming the global financial system since the nations comprising the BRIC make up 40 percent of the world’s population and nearly a fifth of its growth. Given these statistics, the BRICS feels they deserve a “greater say in global affairs.” While BRICS influence has increased since the start of the global financial crisis, there is still much more to be done.

BRICS Status

The BRICS will be discussing rules regarding international trade but there is no guarantee that it will hold much weight. BRICS are in favor of free trade and against protectionism, but in general don’t agree on much. Since all BRIC countries fared well vis-à-vis the 2008 economic crisis, they have already proven themselves. India has a global economic status vis-à-vis being a service provider and engages in the most trade with China although has a large trade deficit with the Chinese.

China Success

China is doing very well in the hi-tech industry, now having the status as a “mass producer of hi-tech products,” such as semi-conductors and solar panels. As well it is doing well in garment and textile industries, maintaining its reputation for being top in low-cost high value markets. At the end of the day China needs to continue to “maintain competitiveness in the global economy [through] low-cost manufacturing.” But if prices start to go up, then what will start happening is that companies will start looking elsewhere like Vietnam.

Indeed, just this last year China started constructing high-speed rail around the world, and is now “home to the world’s fastest train,” and it looks like Brazil is going to use Chinese firms to plan their high-speed rail project. But perhaps some of China’s success will come at the expense of other countries. Brazil and India are “concerned” China will “flood their markets with cheap goods.”

BRIC Cohesion?

Even though the four (now five) countries form the BRIC, it seems that in general, experts feel that the acronym alone is insufficient to give them a unified presence “on the global stage.” It is going to take much more time and a “wait-and-see” approach will have to be taken vis-à-vis G20 and other countries collaboration. While the BRIC are lessening their need to work with developed economies, globally they still have to collaborate with the “major industrialized nations.”

So the BRIC (or BRICS) do definitely have much to offer, but they need to work on compromising so that they can become a more cohesive unit and thus a force to be reckoned with vis-à-vis reforming the global financial system.

Japanese Properties to Quake?

April 12, 2011 by Tian Tan

It was bad enough that the whole of Japan was totally shaken up in more ways than one because of the tsunami disaster, but now it seems like the same is going to happen to what remains of its real estate market. Perhaps not surprisingly, companies are now reported as being “cautious” vis-à-vis the country’s property market although they are trying not to enter into drama-panic mode. As Prudential Real Estate Investors Chief Executive J. Allen Smith put it, “we are taking a wait-and-see approach,” given that so little time has lapsed since the disaster, thus rendering it too early to look at the economy and the markets in a stable light.

Real Estate Troubles Pre-Quake

However, what many are failing to realize, is that even before the terrible disasters struck Japan, the country was reeling from real estate woes. Indeed, over the last two-and a-half years, figures showed a drop in the country’s commercial real estate markets by nearly 20 percent (to the end of the third quarter of 2010). Even at the time this was somewhat of a shock, with Japan ranking as the second biggest “commercial property market by value,” being “one of the few major real estate markets to continue to record capital depreciation.” This clearly reflects its stagnant economic growth.

No Long-Term Lull

So the question being asked then – given all this background information – is what chance does the country now stand of beefing up its real estate market? Well, things don’t have to be all that gloomy, at least not for the long-term. While it is the case that companies like Prudential Real Estate Investors are standing back somewhat from jumping on Japanese properties, they hope this will change in the not-so-distant future. Indeed, the country was described by the company as “an important real estate market,” so with that kind of language, it is unlikely to show itself as a fair-weathered friend.

As well, one of Prudential’s new funds has “earmarked about 50% of capital for Japan,” although it is still “taking a step back” vis-à-vis the country and its real estate. Still, there is funding going on in certain specific parts and markets of Japan, like Tokyo’s retail property assets. Thankfully, according to Smith, “the assets weren’t damaged in the massive quakes.”

Prudential Investing

Despite all of this, it does seem that Prudential remains serious about Japan and its real estate market. Even when things were looking particularly gruesome, the company’s financial chair and CEO John Strangfeld committed the Prudential Foundation to putting $6.1 million to “support disaster relief in Japan,” at the end of last month. Moreover, at around the same time, Prudential Real Estate Investors “co-invested with clients on two Pan-Asia funds totaling about $1.5 billion that have ‘meaningful allocations to Japan.’”

So while things definitely could be better for Japan, its economy and its real estate market, given the earthquake and tsunami disaster, as well as the problems it was experiencing prior to all of this in its markets, it seems clear that there is still confidence in the world’s second largest commercial property market, third largest economy and global financial player.

Protect Yemen from al-Qaeda

April 10, 2011 by Tian Tan

Yemen is not beyond hope according to “two influential French senators.” It can be saved from “becoming the next base for Al Qaeda” despite the fact that it is currently “faltering,” leading to fear brewing in Egypt, Kuwait and Qatar.
All might not be in agreement with this. It seems that Saudi Arabian officials fear Yemen could be a “more hospitable environment for terrorists than even Afghanistan,” leading to Al Qaeda’s main home. This must be pretty scary for Yemen and its people.

America Understands Threat to Yemen

America is no stranger to Al-Qaeda or its threats and is now revealing “previously secret diplomatic cables,” from 2009-10 (from WikiLeaks) showing a country about to fail even without all the uprisings; President Ali Abdullah Saleh who “exploited the threat of al-Qaeda to extract foreign counter-terrorism help that he sometimes diverted for use against internal foes; and an al-Qaeda franchise remarkably suited to thriving in Yemen’s tribal culture and rugged terrain.” In addition, the cables are showing it was Yemen that became the “launch pad for attacks” such as the 2009 attempted Detroit-bound airliner bombing.

Saleh Needs to Watch Out

Saleh has also been getting a bad rep himself recently, as concern grows over what is happening in Yemen, “disrupting counter-terrorism operations involving U.S. Special Operations forces, aerial surveillance from armed Predator aircraft and clandestine CIA operations.” Ultimately, America is said to have “strongly condemned any illegal disclosure of classified information,” which would anyway deter diplomatic efforts, threaten individual and national security and “undermine [their] efforts to work with countries to solve shared problems.”

Citigroup: Putting Money In; Taking Money Out

April 7, 2011 by Tian Tan

Citigroup Asia Investments

Latest news from Citigroup Inc. is the possibility of a $2bn investment in Asia Pacific banking. This is in line with the bank’s attempt to increase its “service offerings to the expanding middle class in the region.” According to the company’s Asia-Pacific region head of consumer banking Jonathan Larsen, “the opportunity is very significant. I think the broad trend will continue, i.e. the growth of the middle class, the increase in concentration of affluent, the increase in growth of consumption.” The stock price has changed -5.9 percent over the last three months.

New Profit Areas for Citigroup

This move will lead to new areas of profitability for Citigroup since at some point it was banned from adding Indonesian wealth management clients due to a potential fraud issue. Since the bank makes tons of its money through emerging markets, this new area will clearly render it a great deal of extra monies.

Bad Citigroup Publicity

Well sometimes even a reputable institution like Citigroup can fall into bad ways or at least be accused of t his. According to Arief Sulistyanto (National Police Director for Economy and Special Crime) it has been alleged that a local relationship manager stole 16.1 billion rupiah from three clients back in 2009-10 “by using blank forms signed by the customers.”

Clearly Citigroup needs to move away from bad things happening and clear its good name. Thankfully it has a pretty good reputation and with its new moves into potential Asia investments, it needs to work hard to maintain (and improve on) this so that they are known for putting money in (vis-à-vis investments) rather than taking money out (alleged stolen money).

Kuwaiti Investments

April 5, 2011 by Tian Tan

Kuwait Working with Morocco

North Africa Holding Company (NorAH), a Kuwaiti investment firm has just “acquired a minority stake in a Morocco real estate developer,” with its investment and place on the board in Dar Saada Company (DSC). It looks like there will be significant opportunities for NorAh in the North African housing market that is currently on an up.

NorAH’s Investment Goals

Given NorAH’s strong, solid, stable base, it is the perfect company to make an investment. It works well with various economies in the North African region, having the capacity (with its KD 50 million capital base) to “contribute to the sustainable development” there. It is also “one of the largest pan-regional investment companies.” When it joins up with other companies, it can help them become “premier regional and global players.” Since it recognized that the housing market had huge potential, it made sense for it to move in that direction. Since there hasn’t been such a commitment by the government to respond to the lack of Moroccan affordable housing, the company’s CEO, Emad Anwar Al-Saleh said the sector is likely to undergo “major growth in the next few years.”

NorAH Gets Assistance

NorAH has been receiving significant assistance in raising the necessary $137m for the stake. Companies providing capital include: Wafa Assurances; Aabar Investments (Abu Dhabi), RMA Wataniya and Idraj Capital Development Fund. In addition, NorAH plans to “target investment opportunities arising in North African economies.”

China-Mongolia Investment

April 5, 2011 by Tian Tan

It seems that the China-Mongolia border is set to be getting a coal processing project which will “better use coal imports from the Republic of Mongolia.” China’s biggest coal producer – China Shenhua Energy Co – has just set out plans at an estimated cost of 10 billion yuan for this venture. Construction has already started in the Ganqimaodu Customs Processing Park.
Ganqimaodu Customs is a major energy imports gateway between China and the Republic of Mongolia, handling a staggering 7.71 million tons of coal imports in 2010. In addition, it has been said that the Shenhua project is set to have a “coal washing ability of 6 million tons per year, coking capacity of 2.4 million tons a year and an annual capacity of producing 4.8 million tons of methanol and 30,000 tons of tar, respectively” by 2012.

Major Mongolian Economic Reform

This new investment project doesn’t stand alone vis-à-vis economic reform in the Republic of Mongolia. Economically, the region is set to undertake significant change over the next ten years, especially vis-à-vis the mining field with its huge reserves and potential for a “mining mania” and Mongolia’s reaction to it all. The recent Mongolia Economic Reform focused on how best to cope with this transition. What remains to be seen is how the country will deal with it all and how its other industries – most notably agriculture (its largest industry) will cope with “a strengthening currency and Chinese competitiveness is squeezing even this most basic of industries.”

So while there is good news for Mongolia vis-à-vis the coal processing project with China, there is always more to the story. Mongolia has other issues with which to deal that are impacting its region on a day-to-day basis.

Happy Days for UAE

April 3, 2011 by Tian Tan

Well, anyone living and investing in the UAE should be pretty happy. Things are going well which is why it shouldn’t be such a great surprise that the population has more than doubled in the last few years. In fact, figures show that there has been an increase of a staggering 65 percent inhabitants in the region from 2006 to 2010. This could be to do with the economy since most of these newbies to the area are comprised of overseas investors and workers with a mere 11 percent of those living there being UAE nationals at the end of June 2010. It is Abu Dhabi that has had the large influx of investors.

GDP Rise

The region’s non-oil GDP was said to have increased by 3.3 percent over the course of the year, according to figures released by the International Monetary Fund, as opposed to the 2.1 percent figure of last year. Additional development is anticipated due to the UAE’s “low interest rates, strong crude prices and better prospects promote expansion. ” People living in the area are thrilled with the news and “optimistic” that such trends are set to continue.

More Pocket Money?

But, at the end of the day, it remains unclear as to whether all this good news will mean more money in the pocket of the average UAE citizen. Apparently it may not. It looks like salaries are going to either stay the same or just increase a minimal amount. This is despite the fact that it seems to be an employee’s market right now as companies are on the lookout for a not-endless supply of skilled workers. So it seems a bit strange that salaries remain under lock and key. Nonetheless it’s all relative. Despite the lack of rising salaries, according to a study these salaries are still at the top of the entire Middle East market.

Qatar: Investment Building and Environment Cleaning

April 3, 2011 by Tian Tan

Mega-Millions for Qatar Investments

Qatar is on its way to making mega-millions; at least that’s what it is hoping for at the upcoming Business and Investment Opportunities forum due to take place in Washington this week. Indeed, H E Mohamed bin Abdullah Al Rumaihi (the country’s Assistant Foreign Minister for Follow-up Affairs) is looking at a staggering $5bn worth of investments. To kick-start this, five contracts will be signed in an attempt to expand trade links between the two sides. It seems that Qatar is looking into forging business deals with Americans, following the conference which will have around 400 US trade and industry members and 200 Qatari officials participating in.
This makes sense. Both sides have quite a bit to offer in the field. Qatar has a reputation for being the world’s greatest exporter of Liquefied Natural Gas and America the world’s largest energy consumer.

Qatar and America: More than just Resources Merger

What’s interesting about the investment opportunities that are set to take place between Qatar and America is that it looks set to go beyond the country’s natural resources. By joining together in some areas, Al Rumaihi belives other areas will develop too including banking, communications, education and health. This is particularly the case since American companies are already predicting the benefit of playing a part in Qatar’s health and water management areas since it already acts as the country’s “largest trade partner,” as indicated by the existence of Doha’s America Chamber of Commerce and Industry.

US-Qatar Expanding Trade

Truth is, all this isn’t such new news for the two countries. Already figures have shown how trade has been expanding between Qatar and the US with a staggering 340 percent increase from 2003 to 2009 of trade between Doha and Washington. And America clearly takes pride in the country, having established eight universities in Qatar (more than they have done in any other country).

Qatar Cleans Up

Other good news in Qatar is that the country is showing its “commitment to preserving Qatar’s natural habitat and wildlife at the ongoing Qatar Petroleum 2011 Environment Fair at the Doha Exhibition Centre.” Clearly, the better a country’s environment, the more attractive it will be to other country’s vis-à-vis investment opportunities as this also indicates greater stability. Environmental bodies in Qatar have been working closely with RasGas Company Limited to further this goal. At the conference, individuals were also presented with the opportunity of becoming an environmental ambassador for the company and “make a positive impact on sustainable development in Qatar.”