Hong Kong: a Global Center for Hedge Fund Activity

Hong Kong has increasingly become a power house in the financial world, and with good reason. Many hedge fund managers, like Seth Fischer Oasis Investments Limited, use Hong Kong as their base of activity.

A survey released by the Securities and Futures Commission (SFC) in March 2011 confirmed this growth of activity. Entitled “Report of the Survey on Hedge Fund Activities of SFC-licensed Managers/Advisers,” it shows that assets under management or advisory in Hong Kong increased 14% from March 2009 to September 2010. The number of hedge funds that are managed by SFC-licensed hedge fund managers in Hong Kong also grew tremendously. While it stood at 538 in September of 2010, it was five times the level in 2004.

By September 2010, the survey pinpointed that 66.1% of the total assets under management were invested in the Asia Pacific markets and 92% of the investors were from overseas.

As Martin Wheatley, the SFC’s Chief Executive Officer explained, “Closer scrutiny of the hedge fund industry is a global trend. We will continue to maintain a balanced approach to regulation with a view to allowing room for industry development and growth without compromising investor protection.”

Trade Financing in Asia

The Asian Development Bank is expecting a sudden increase in demand for trade financing as European banks limit their lending in the face of the ongoing crisis.

“The trade-finance program is filling persistent market gaps, but it will become even more important,” said Steve beck of ADB. “With some major European banks retrenching from the trade-finance business, we see that the gaps are increasing.”

Beck predicts even more growth in the operation, which is already worth $3 billion. A credit crunch will most affect smaller emerging markets such as Bangladesh, Sri Lanka and Vietnam. There is risk for a collapse similar to that of 2008, which will inhibit growth across the continent and add to the global recession.

Now, European banks are scrambling to raise their capital ratios, and Morgan Stanley estimated that many lenders would lower their leverage by $2 trillion to $3 trillion.

“European banks that had exposure in Asia have had to repatriate some of the money from Asia, and that’s why you see volatility” in the area’s exchange rates, explained Iwan Azis, also of ADB.

IATA Lowers Profit Expectations for 2012

IATA has lowered its profit expectations from its global airline earnings in 2012 to $3.5 billion, 28.6% less than its last prediction, stating its concerns of a net loss of $8.3 billion if the Eurozone crisis continues to worsen and global GDO growth falls.

IATA’s previous forecast was released in September, in which they revealed their expectations of a $4.9 billion profit next year. The airline industry leaders represents more than 200 airlines around the world, including Asia, Europe and the Americas.

“The biggest risk facing airline profitability over the next year is the economic turmoil that would result from a failure of governments to resolve the Eurozone sovereign debt crisis. Such an outcome could lead to losses of over $8 billion- the largest since the 2008 financial crisis,” said Tony Tyler of IATA.

“This admittedly worst-case- but by no means unimaginable- scenario should serve as a wake up call to governments around the world,” he continued. “Government policies need to recognize aviation’s vital contribution to the health of the economy.”

He added that even the best case scenario for next year “is for a new margin of just 0.6% on revenues of $618 billion. But the industry is really moving at two speeds, with highly taxed European carriers headed into the red.”

China’s Economy Threatened by Global Crisis

Chinese leaders have implied that times may get tougher for the country’s exports with a warning that the global crisis may impact the nation’s economy.

Vice Premier Wang Qishan, the top financial official in China, encouraged companies to contribute their efforts to securing a “stable increase” in exports, despite the lessening of external demand.

“The severe and complex world economic situation will inevitably mean global demand is insufficient,” Wang said.

Over the past year, China’s exports increased 15.9%, or $157.49 billion, down from the $169.7 billion of the previous year. The fall is a result of decreasing demand in Europe and the U.S.

Chinese Commerce Minister Chen Deming agreed with this approach, also warning that the global woes may have negative results on the nation’s economic growth next year.

“Under the influence of the contracting international economy and market, China’s economic growth next year may slow slightly,” he said.

Black Friday Sales Boost the MSCI Asia Pacific Index

Record-breaking Black Friday sales in the United States have sent the MSCI Asia Pacific Index towards its biggest gain in two weeks. This is great news for exporters, and commodity pool operators.

The results of the Black Friday sales proved, according to Naoki Fujiwara of Shinkin Asset Management, that the U.S. is “in a mild recovery, and consumer’s purchasing power isn’t something to be pessimistic about. But with employment looking bleak, it’s uncertain whether the strong spending will continue.”

Alumina Ltd. increased 6.4% in Sydney, and Japan’s top energy explorer Inpex Corp jumped 3.8%. Hong Kong’s Li & Fung, a clothing and toy supplier with 65% of its sales based in the U.S., rose 8.8% as well.

Japan’s Nikkei 225 Stock Average rose 1.6%, and Australia’s S&P/ASX 200 increased 1.9%, too. South Korea’s Kospi Index and Hong Kong’s Hang Seng Index both rose as well.

Asian Stocks Fall as Congressional Budget Office Reaches Deadline

Asian stocks have fallen a fifth day, as have Standard & Poor’s 500 Index futures and the Australian and New Zealand dollars. The MSCI Asia Pacific Index fell 0.4% in Tokyo, nearing to longest losing streak since August.

According to a Democratic aide, the congressional committee should be announcing its failure to reach an agreement on $1.2 trillion in federal budget savings. Japenese exports saw declines for the first time in a quarter, and Singapore predicts slow economic growth next year.

“There’s likely to be a continuing impasse and people will focus on the stability of the U.S. politically,” Tim Schroeders of Pengana Capital Ltd. said. “People will probably sit on the sideline and wait for clarity.”

Futures which expire in December show that the S&P 500 may extend its 3.8% decrease. Today marks the deadline for the Congressional Budget Office to receive a potential plan. The Congressional panel has thus far been deadlocked over taxes, while Democrats seek tax increases and Republicans push for tax cut extensions.

Asian Stocks Fall as Greek Prime Minister Steps Down

Asian stocks suffered a blow as Greek Prime Minister George Papandreou agreed to leave his post and Italian PM Silvio Berlusconi fought to maintain his advantage in face of the parliamentary vote.

HSBC Hodings, Europe’s primary lender, slipped 1% in Hong Kong, while Takeda Pharmaceutical Co. fell 2.3%. Cnooc Ltd. fell 2.2% after the Chinese oil explorer’s BP Plc purchase in Argentina fell through.

The MSCI Asia Pacific Index lost 0.4% in Tokyo, with approximately three shares falling for every two that rose. The measure fell 3.6% last week, the most since the beginning of the quarter, following Greece’s referendum plan.

“It might get worse before it gets better,” said Binay Chandgothia of Principal Global Investors in Hong Kong. “If you look at the experience in the last 12 to 18 months in Europe, the crisis brings out the right solution. The way they are going to move is one step forward, two steps backward. We have to live with this.”

China’s Stock Market and Greece’s Referendum: Michiya Tomita

Asian stocks have fallen for three days as Greece’s referendum plan heightens concerns that the debt crisis will not be contained. Hong Kong stocks reconvened as a result of beliefs that China will now act to stimulate its economy.

The MSCI Asia Pacific Index fell 0.6% to 118.41 in Tokyo, while three stocks fell for every two that rose. Meanwhile, banks like the Industrial and Commercial Bank of China, as well as developer and infrastructure companies rallied with hopes of an economic boost from the government.

“A loosening of monetary policy in China could support the stock market,” said Michiya Tomita, who helps oversee billions of dollars for Mitsubishi UFJ Asset Management Co. “Any gains may not be sustainable as uncertainties in Europe persist. Investors are taking a wait-and –see attitude.”

Shanghai to Become Regional Hub for International Commerce

At Shanghai’s 23rd International Business Leaders’ Advisory Council (IBLAC), over 500 government officials were told that the city is on its way to becoming a regional base for international trade within Asia’s economy.

“It’s the beginning of an Asian century,” Maurice Greenberg, the former chairman of IBLAC, said. “Shanghai is not only the major port of entry in Asia, but also the world’s trade center- with its population, talent and business environment, it has everything necessary to become a leader, not only in Asia, but the world.”

Numerous VIPs agreed, stating that the goals would be reached by 2020. According to former U.S. secretary of commerce Carlos Gutierrez, as well as Shanghai Mayor Han Zheng, the city will undoubtedly become a world leader in business, finance, shipping and trade.

“Shanghai has transformed into a modern metropolitan city from one that was traditionally industrial and commerce-based,” said Mayor Zheng. “Looking to the future, we plan to build the city into a market with the capacity to allocate resources to the world.

“In order to do so, we must insist on building a market driven by innovation, and developed strategically.”

Asian Shares Increase as Eurozone Meetings Continue

Asian shares saw a dramatic increase following this weekend’s meetings in Europe, which resulted in “good progress.” According to European finance ministers, the Eurozone plans to boost its $610 billion rescue fund in an effort to draw investors and convince markets that it is indeed capable of protecting floundering countries such as Italy and Greece.

Few real details were released after the meetings, though. Investors have continued to focus on the yen, which has reached a record post-war high of 75.78 against the dollar. As a result, Japanese finance minister Jun Azumi has called for “decisive steps” to slow the currency’s dramatic rise, amid concerns that the yen will hinder the country’s export market.

Hong Kong and Shanghai both climbed this week as well, as improved manufacturing data was released from China, but Europe’s crisis does not seem to have slowed. Debates are still common as the Eurozone struggles to find a solution for the economic issue without further provoking its richer nations, such as Germany, who have placed their limit after repeatedly bailing out the region’s weaker members.

“The mood of trading is generally optimistic that Eurozone policy makers will announce significant measures on Wednesday to bolster the bailout fund and resolve Greece’s debt crisis, while also supporting the region’s banks,” explained Stan Shamu of IG Markets.