New Zealand Basks in Asian Investment

by

Prime Minister John Key revealed yesterday that New Zealand is becoming a major investment hub for Asian businesses and financiers, and the nation’s currency is expecting a boost. Some of the targets include government debt securities as well as farms and natural resources.

In fact, Shanghai Pengxin Group, a Chinese company, recently received permission to acquire sixteen dairy farms in New Zealand in one of the largest transactions ever sealed by the two countries.

When interviewed by the Wall Street Journal during a visit in Australia, Key said: “We are starting to see quite an increase in interest from Asia, particularly as they look at New Zealand and see the potential in the mining and exploration centers, we’ve seen significant interest there, and obviously in the agriculture sector where we have a pre-eminent position.”

Key added that it is the New Zealnd-based assets that so attract China at this time. Some dealings have caused minor tension in the region, however.

“They like the New Zealand story. They are a country that is significantly worried about food security. Not only do they want to buy food, but they are increasingly starting to buy products on the basis of health benefits.” Key continued, stating that “Where we see more sensitivity is around the purchase of real assets in New Zealand.”

China is currently New Zealand’s second-largest market, following close behind the neighboring Australia.

Asian Investment Increases 150% in London Office Market

by

According to Jones Lang LaSalle, Asian investment into the London office market has increased 150% since 2010. In 2011, Asian investors were responsible for $2.2 billion of $13.9 billion in transactions in the investment market of Central London. Asian economy is on the rise despite lessening demand in Europe, as well as the festering debt crisis. Real estate industries in the region, however, are passing muster.

Jones Lang LaSalle’s International Capital Group’s Alistair Meadows said “During 2011 we have seen Asian investment into London more than double. What has been evident is the emergence of ‘new’ sources of Asian capital attracted to London ranging from pension funds like EPF & PNB from Malaysia to Ultra High Net Worth (UHNW) investors like Khoon Hong Kuok and Martua Sitorus who acquired ‘Aviva Tower’ in the City of London for 288 million euro, advised by LaSalle.

“Asian buyers were especially dominant in the City of London office market, accounting for 23 percent of annual investment volumes. Indeed, of the 3.5 billion euro traded in the City office market last year is many sizes over 100 million euro. 40% was undertaken by Asian buyers. We predict seeing a diverse range of Asian investors being very active in London in 2012 and likely to account for over 20 percent of investment volumes by year end.”

Andrew Hawkin, also from LaSalle, added: “Over the next 12 months Asian money will also continue to target the City for higher income returns, and the West Ed for long-term wealth preservation, reinforcing London’s perception as a safe haven. Already in 2012 Malaysian capital is rumored to have placed the majority of a major German portfolio under offer in the City. London’s transparency, relatively long leases and high yield spread above the risk free rate, continues to be attractive to Asian Capital seeking to diversify away from their home markets.” He noted that the trend is likely to be long-lasting.

EU Debt Crisis May Not Hinder Asian Businesses

by

Asian businesses are feeling more secure thanks to lessons from the global financial slump and recovering U.S. banks. Analysts have admitted that while an all-out Eurozone crisis may affect demand for Asian products, exporters throughout the region are less likely to suffer as much as they did in 2008 when Lehman Brothers collapsed.

“The importance of trade finance to the global economy is better understodd now than in 2008,” explained Mark Williams of Capital Economics. “One of the factors that contributed to the recovery in 2009 was the $250 billion of trade-finance guarantees announced… In the event of a second global financial crisis, future guarantees are likely to be forthcoming.”

Often compared to the oil that greases a machine, trade finance is a key component in an economy. EU banks’ exposure to it in Asia is surprisingly high, relative to their loans in the region. Williams pointed out, however, that the Bank of International Settlements revealed that Eurozone banks are responsible for a mere 2.3% of total credit in the emerging Asia. Meanwhile, they have a 47.3% share of lending in emerging Europe, and 17.1% in Latin America.

The recent developments in trade finance have encouraged banks to increase interest rates.

“The reality is spreads have gone up fairly significantly- almost to the 2008 peak levels- over the last six weeks… But the higher spreads are here to stay,” said Ravi Saxena of Citibank.

Burberry Experiences 36% Growth in Asian Market

by

Burberry may have experienced weaker sales in the U.S. market, but any losses were more than covered by growth in its markets in China and Europe. The luxury fashion house, with faces including model-actress Rosie Huntington-Whitely, recently announced 21% increase in revenue in both regions.

The American market’s growth slowed, growing only 4% despite Burberry’s streamlined operation, but the line saw gains of 36% and 20% in Asia and Europe. Paris and Sao Paulo are some of the company’s strongest bases, and Brazil is growing in importance as well.

Chief financial officer Stacey Cartwright said “We are very pleased. We think it was a strong performance during a key period. Softer markets were southern Europe and Korea. We are now up against very strong competition and the comparables are growing more difficult to beat each period but we are pleased with the performance.”

UBS analysts have explained the struggling growth in the U.S. market: “The low number was due to planned rationalizations of wholesale channels, and comparable mainline store sales growth was in the high single digits, with good growth momentum at key department store partners.”

Half of the fashion line’s global growth was triggered by sales of coats and leather bags. Other key products include knitwear, men’s accessories and aftershave.

The positive sales figures imply that Burberry’s strategy to avoid financial crises has been successful thus far. The company is focusing on flagship markets in cities like Paris, and plans to build its largest store on Regent Street before the Olympics as well.

CEO Angela Ahrendts said “Looking ahead, we remain focused on executing our proven core strategies to achieve long-term sustainable growth, while staying mindful of the challenging macro environment.”

Standard & Poor’s Downgrade; Asian Stocks Slip

by

Standard & Poor’s recently downgraded nine European countries, including France. The ratings imply that a solution to the issues in the region has yet to be found as the Eurozone debt crisis festers. Though the downgrades were expected by many, the situation remains shaky as concerns begin to spread.

“The downgrade set a nervous for this week’s markets as we approach more significant hurdles in the evolution of the Eurozone crisis,” said Ric Spooner of CMC Markets.

Asian stocks have slipped as a result of the ratings. MSCI’s index of Asia Pacific shares, excluding Japan, fell 0.3% after reaching a one-month high last week, while Japan’s Nikkei slid down to 1.51%. Hong Kong’s Hang Seng fell 1.01%, the Shanghai Composite 0.75%, and Korea’s Kospi dropped 1%.

Markets across the globe are bracing themselves as negotiations regarding the Greek and Eurozone debt remain relatively stagnant despite several efforts to get them moving.

“Failure of these negotiations remains a significant contagion risk,” Spooner explained.

At the moment, experts have projected an 8.7% growth in China’s economy for 2012. This growth will have a significant impact on the region, and will ease numerous financial pressures. If GDP does not, in fact, meet expectations, it may result in export-led downturns that China will be unable to resolve.

Firms Lured by East Java’s Infrastructure

by

East Java has been attracting investments as a result of its good infrastructure. The country’s economy grew more than 7% in last year’s third quarter, with two commercial and four pioneer airports.

Now, ten Korean and Japanese companies are relocating their plants from Southeast Asia to East Java, pulled in by the quality of its infrastructure. The firms deal in labor-based industries including furniture, footwear, industrial waste management and fertilizer.

Chairman of East Java’s Investment Coordinating Board (BKPMD) Warno Harisasono welcomed the newcomers and their plans.

“They earlier had their plants in the Philippines, Thailand and Vietnam,” he said. “Now we will encourage those firms to realize their investment in middle parts of East Java, such as Madiun, Mojokerto, Kertosono and Jombang, as trans-Java toll roads, slated to be built in 2012, will pass through the areas.”

According to government data, foreign investment in East Java reached $4.02 billion last yearly, double the amount listed in 2010.

Ford India Invests Millions to Manufacture Compact SUV ‘EcoSport’

by

Michael Boneham, Ford India President and Managing Director, announced that the automotive company is to invest $142 million in its Chennai plant in India. The investment will go towards manufacturing Ford’s new compact SUV, called ‘EcoSport’. The company is setting up an additional, $1 billion investment into a new plant in Sanand, Gujarat.

Ford India’s new vehicle will be launched in the market later this year, making its debut in India and then expanding to 100 markets across the globe. According to the company, the EcoSport will be driven by a one-liter EcoBoost engine. The power and performance of the SUV, however, will easily rival 1.6 gasoline engines.

“We have promised to bring more than 50 vehicles and powertrains in Asia and Africa by mid-decade and the all new EcoSport continues to deliver that pledge,” said Asia-Pacific President for Ford Joe Hinrichs.

“This is the first compact SUV and we are launching it right at the heart of the compact vehicles market,” said Ford CEO Alan Mulally, adding that the global market is still strong, with an expectation of al leat 5% growth over the next two years consecutively. “The Asia-Pacific market has slowed down a little bit, but there is tremendous growth potential,” he said.

Blackstone Sees China as Investment Hotspot for 2012

by

The Asia-Pacific leader of Blackstone Group L.P. recently announced that the firm views China and Southeast Asia as the top two hot spots for Asian investments next year.

“Certainly China will remain a core focus for us. We are long-term very bullish about China,’ said Michael Chae. “Southeast Asia, and Indonesia in particular, we also think it quite interesting.”

He went on the add that Asia is still strongly tied with the West, and that volatility in both global and Asian markets is impacting investment moves now, and will continue to do so throughout 2012.

“There’s an above-average level of uncertainty around macro conditions in this region and globally, which makes it a really intellectually interesting time to be alive and to be investing,” Chae said.

Investments in growth markets such as China focuses on consumption, he said. Blackstone, therefore, will put an emphasis on consumer retail, healthcare and healthcare products, leisure and pharmaceuticals.

“In China and some of the other emerging markets in Asia, this is sort of a truism by now for investors, domestic consumption growth, growth of the middle class and urbanization themes,” he said.

Asia Headed Towards Becoming Largest Corporate Market by 2015

by

Global consulting firm McKinsey & Co released a report stating that global corporate and investment banks will get almost 50% of their revenues (around $799 billion) from Asia by 2015. The leading countries will be China and India. In 2010, the revenues originating in Asia constituted nearly 33%, or $442 billion.

The report, entitled ‘Asia: The Future of Corporate and Investment Banking’, stated: “The surprisingly strong economic health of Asian economies in 2010 saw the risk-adjusted corporate and investment banking (CIB) revenues from the continent, touching nearly $442 billion, just under a third of the global total. But by 2015, this revenue pool will rise to about $790 billion by 2015 or 45% of the global CIB revenue.”

Akash Lal, McKinsey partner, said “Asia will become the largest and fastest growing region in the wholesale banking universe by 2015.”

He continued, explaining that the market will change dramatically as new investors, more demanding customers and multi-regional businesses join the industry. According to Emmanuel Pitsilis, senior partner and Asia corporate and investment banking practices leader, the biggest challenges in the growing industry will be regulation and very intense competition.

“Global banks will have to find a path to become more Asian by making the right investments from both business as well as geographical perspectives, apart from building a business model that is both profitable and durable,” he explained.

East Asian Giants Strengthen Financial Ties

by

Japanese Prime Minister Yoshihiko Noda recently visited Beijing to meet with China’s leaders. The two governments revealed a surprising plan to use their own currencies in bilateral trade, instead of in U.S. dollars, as part of an effort to strengthen financial ties between the two economic giants. The pledges came as a shock; the countries are competitively the second and third largest economies in the world. They also struggle with political issues regarding territory and other disagreements.

The East Asian countries also agreed to encourage the sale of bonds denominated in China’s yuan by foreign markets, Japanese companies as well as the Japan Bank of International Cooperation in China’s markets. Until now, these markets have been mostly closed to investors from outside.

“To support the growing economic and financial ties between China and Japan, the leaders of China and Japan have agreed to enhance mutual cooperation in financial markets of both countries and encourage fiscal transactions between the two countries,” the governments said.

East Asia is the fastest-growing region in the world today. This recent development is likely to significantly reduce the U.S. dollar’s dominance in the area.