Economy

China’s Economy Threatened by Global Crisis

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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

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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

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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

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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

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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

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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

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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.

Asian Markets Take Hit as Recession Worsens

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Though the debt crisis has struck the U.S. and EU with fervor, Asian markets have seen some major hits recently as well. The selloff is a result of global recession concerns, as well as worries regarding the financial fragility and cash crunch.

“The way markets are trading, people are anticipating some kind of falling off the cliff,” said Wendy Liu, head of China research for Royal Bank of Scotland. “These valuations don’t come every year.”

Hong Kong’s Hang Seng Index has fallen 23% over the past year, which includes a 12% drop just this month. The MSCI AC Asia ex Japan Index, which tracks all markets throughout Asia, has seen a decrease of 24% this year.

Despite the drawbacks, the Asian economies have recorded solid growth. Until quite recently, central banks were raising interest rates in an effort to lessen inflation.

According to Markus Rosgen, head of Asia Pacific Equity Strategy at Citigroup in Hong Kon, “Markets in Asia are telling you there is going to be global recession.” He added that stocks are pricing in an approximately 33% drop in corporate earnings.

Ewen Cameron Watt of BlackRock backed this, stating “The degree of selloff in emerging-market debt and equities and currencies suggest there is something more than a concern about slowing economies at play here.”

Asian Stocks Fall as World Concern Heightens

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Asian stocks have dropped, deepening the hole of the regional benchmark index’s biggest quarterly deterioration in over two years.

Sony Corp fell 6.2% in Tokyo, reaching its lowest price in 24 years, while Toyota Motor Corp, the largest carmaker in the world, fell 2% as well. Building materials, suppliers and mining companies have also seen significant losses.

“The U.S. is not falling into recession, but it’s definitely slowing down,” said Diane Lin of Pengana Capital in Sydney. “We might face more risks, particularly in a market that hasn’t had enough of a correction.”

In Tokyo, the MSCI Asia Pacific Index fell 2.8%, hitting 109.99., just before the meeting with the EU finance ministers. Nearly seven stocks fell for each that rose in the measure, and every one of the ten industry groups weakened.

The world’s concern increases as the gauge drops more than 20%, the European debt crisis worsens and the U.S. economic growth recedes.

Cutting the Asia Fund Investments

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In recent financial news, Gottex Fund Management Holdings Ltd., just cut in half its Asia fund investments to improve returns.  While last year, it’s Asia fund had 45 holdings, this year it is expected to have only 22, as reported by Co-Founder Max Gottschalk.

The Switzerland-based company invests $400 million in 38 Asia-focused funds, and the numbers are likely to drop to 30 now.

As Gottschalk explained, "When investors are looking to invest in Asia, they're looking for punchier returns. Funds of funds are earning part of their keeps by providing access to some of the younger, emerging managers or smaller managers."

Gottex isn’t alone in the shift that it’s making.  They are joining companies like Pictet & Cie to shift to have newer, lesser-known managers to boost their returns.  Gottex’s plan at the moment is to change about 20% of the Asia hedge funds it invests in each year, up from 15%.

As Gottschalk explained, "There's a perception that the Asia market, due to its increased risks, should generate higher performance. Also there's no doubt that Asia, and the Chinese economy in particular, are drivers of global growth."