Economy

Novelis Enters Market in Shanghai

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Novelis just announced the opening of its latest office in the Shanghai World Financial Center.  This opening signals their intention to expand their presence in Asia and they have appointed James Liu as the Managing Director of Novelis China and as the Director for Sales and Marketing of Automotive Asia.

Liu’s lofty goals will include expanding Novelis’ automotive growth opportunities in both China and Korea.  As the President and CEO of Novelis said, "Aluminum has been growing at a much faster pace than other comparable materials."

"As global urbanization and income continues to accelerate in Asia, and particularly China, the flat rolled aluminum market is expected to double in size there by 2020. The opening of our Shanghai office is an important step for Novelis to further capitalize on this significant opportunity. With an expansion underway in Korea, combined with our move into China, we can better serve rapidly growing consumer demand in Asia for high-margin can, automotive and specialty products."

Novels’ aluminum sheet capacity is set to expand to one million metric tons annually with their investments in both hot rolling and cold rolling operations.  They are, at the moment, investing about $400 million to expand their aluminum rolling and recycling operations in South Korea.

Japan’s Finance Minister Elected as Head of Democratic Party

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Japan’s finance minister Yoshihiko Noda has been elected as the head of the ruling Democratic party, and is likely to soon become the country’s next prime minister as well. Japan’s next prime minister will undoubtedly inherit the region’s financial situation as Europe’s crisis deepens and economies across the globe struggle to stabilize, as well as the resurgent yen, new energy policies, the nuclear crisis and the rebuilding of the devastated northeast coast.

A political analyst in Tokyo, Hiro Katsumata, said “Noda needs to call for a national election within the next two years no matter what. The main challenge for Mr. Noda will be the cohesion in the party and to win in the national election.”

The latest leader of the Democratic Party, who also served as prime minister, was Naoto Kan. He resigned last week as a result of heavy criticism following the earthquake and tsunami in March, as well as the economic status of the country.

Steve Chao reported that “the question is whether the next leader will overcome the hurdles Naoto Kan did not manage to overcome, and, he has to show the public he is able to make the tough decisions that will help the country overcome its economic hurdles.”

Asia Stocks Fall as Crisis in Europe and US Heightens

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As the euro falls further against the dollar, Asian stocks slip as well. Mounting concerns of a new United States recession and the debt crisis in Europe have resulted in investors selling riskier assets.

Employment data in the US last week revealed that no jobs were created last month, for the first time in nearly a year.

“Even if you take out the effect from the Verizon strike, it is still a lousy number and people are concerned that growth is not there anymore,” Dominic Schnider of Singapore’s UBS Wealth Management said.

In the meantime, Europe now faces numerous political and legal trials which can have a damaging effect on the country’s already struggling economy.

“In this atmosphere, foreign investors are likely to remain risk-adverse and inactive,” explained Mitsushige Akino of Ichiyoshi Investment Management in Tokyo.

Tokyo’s Nikkei share average .N225 dropped 2%, and MSCI’s broadcast index of Asia Pacific shares beyond Japan .MIAPJ0000PUS dropped 2.6%, leaving it more than 17% below April’s high. The sectors hit the hardest were energy and materials.

Morgan Stanley’s Growth Estimate for Asia Drops as Inflation Increases

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Like many other financial firms, Morgan Stanley has noted the withdrawal of international investors from stocks in Asia as the economies in the region begin to falter.

One example of this is South Korea, as the won continues to decrease in value. Morgan Stanley’s growth estimate for the nation has been lowered from 4% to 3.6%, while Deutsche Bank AG has lowered its expectations for China’s expansion as well, claiming that the economic crisis throughout the rest of the world will lessen the demand for Asian exports.

“Reported downgrades of economic forecasts reduced appetite for regional assets,” explained Lee Jin III of Hana Bank. “Stock market declines affected Asian currencies including the won.”

Finance Minister Bahk Jae Wan has confirmed that inflation issues continue to plague South Korea and that the government plans to use “all possible” measures in an effort to stabilize prices. For example, the Bank of Korea left interest rates unchanged for a second month in a row, following three major increases this year.

Yuan Strengthens, But Asian Stocks Plunge

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For the first time in seventeen years the yuan has surpassed 6.4 per dollar, thanks to the Federal Reserve’s efforts to keep interest rates low. According to the International Monetary Fund, the stronger yuan will help governments reduce inflation and rebalance the nation’s development, as well as stabilize the global economy.

“The inflation and trade data, together with the Fed’s policy to maintain extremely low interest rates, have fueled faster appreciation,” explained Banny Lam of CCB International Securities in Hong Kong. “Strong economic growth, supported by the latest export figures, also provides investors with confidence to buy the yuan in these turbulent times.”

However, the European debt crisis has had a negative effect on the positive turns in Asia. In countries such as Japan, stocks have suffered severe losses. Mazda Motor Corp, the Japanese carmaker, is one of many companies highly dependent on Europe. Mazda has slumped 4.3 percent, while Canon Inc., Nikon Corp. and numerous others have met similar fates.

“As Europe’s debt crisis spreads, concern is mounting about damage to the financial system,” explains Mitsushige Akino at Ichiyoshi Investment Management Co. “We may slip back into a global equity slump.”

Asian Shares Plunge on Downgrade

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Asian shares plunged today on the S&P downgrade of American debt. Chinese shares fell almost 4 percent, while the Nikkei and Heng Sang fell 2%. The Chinese hold a lot of American debt and now that it has been downgraded the borrowing will probably stop. Despite the obvious connection to the downgrade, the severe plunge in stock prices maybe also due to the weakening global economy,  most notably America’s.

When America weakens economically Asian exports tend to be hurt as one of the biggest consumers of Asian products is the USA.

 

UAE Investment Map to Encourage Foreign Investors

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In an effort to encourage foreign investors to bring their capital to Abu Dhabi, the UAE has set up a “consolidated investment map,” according to a report in the Khaleej Times.  Together with the Ministry of Economy’s Investment Department, Dar-Al-Tawasol (a private marketing firm) has developed a “strategy to market the investment potential of the seven emirates to the global investors, in a project that would span seven years.”  By the end of the year, as noted by the marketing company’s CEO, Feras Dahlan, four investment promotion offices will be open with plans for more in the coming years.

Deciphering the Map

So what would the map do?  According to Dahlan, it would “disseminate information to potential investors, and guide them into the country.”  He explained this to diplomats in Abu Dhabi.  It is hoped that efforts will be coordinated to “promote the UAE as an investment hub” through these offices.  As a way of bringing initial investments, the first focus will be on the 12 industrial nations: Argentina, Brazil, China, Germany, India, Italy, Japan, South Korea, Spain, Turkey, UK and the US.

Investment Opportunities

The main areas of possible investment will be: aluminum, automotive, aviation, energy, renewable energy and ICT sectors.  It seems that these areas specifically have a “huge potential to attract foreign investment.”  There are other areas that also might be attractive to foreign investors such as: education, health, finances and tourism.

Project Launch

The project is due to start in Abu Dhabi via an international investors’ conference on November 9th to 11th.  The aim is that this conference will become an annual event and will be held in a different emirate each year, on a rotation basis.  It also seeks to: “highlight the investment opportunities in the each of the federating units in line with their investment plans.”

Asian Stocks Rallied, But Will it Last

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With news from President Obama that there has been a debt ceiling deal within a day Asian stocks rallied from their current slump, yet the rally as positive as it is could sputter if the US congress fails to pass the deal and doesn’t raise the debt ceiling by Tuesday.  Many Asian countries are particularly sensitive to the USA debt situation since many (most notably China and Japan) are holders of US debt.

Although a default may happen, many argue that an Asian fear of defaulting on their obligations is an over reacting since the the US Government would take care of that first. Even without that fact, Asia’s connection to the US consumer base is vital and with a default or just a downgrade, the USA economy would be imperiled even more hurting Asia’s economy as well.

Australia Entering Armenia

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More Sheep Farms in Armenia

It seems like anything goes in these days of global investment opportunities. Indeed, in a recent news report from Arka, the Armenian Development Agency (ADA) will be privy to a new investment program by a (yet to be named) Australian company. By next month, this will enable the set-up of sheep-breeding farms there, with a capacity of 5,000 sheep. This will take place in conjunction with regional administrations in Armenia and a “territory for building the farms will be defined.” The main goal of this program will be the “farming of genetically traditional semi-stiff-haired types of sheep in Armenia.”

Australia: Armenia’s Auxiliary

So what does Australia have to offer Armenia? According to the ADA’s General Director, Robert Harutyunyan, the Australian company is going to “introduce a standard plan of a sheep-breeding farm in the investment package,” and that later on, there will be a defining of territories for farms through the regions.” ADA’s main aim is to finally eliminate “old soviet standards,” and thereafter develop “new sheep-breeding farms in accordance with international standards.”

Additional Armenian Investment Opportunities

But that is not all. At the moment there are also a few other potential investors hailing from CIS and Arab countries that are looking into these projects with interest and are seeing Armenia as a good place. Plus it seems sheep farming is on the rise since figures for last year showed that “customs cost of 135 thousand sheep increased by 56% making about $14 million compared with 2009.” In addition, according to Harutyunyan, a cheese company in Armenia is looking into expanding its export volumes this fall, following its successful 5 ton export to Russia a few months ago.

Indeed, “if supply exceeds demand here in Armenia, greater volumes may be sent outside.” Forecasts suggest that such supply may indeed “exceed demand by 10 to 20 percent.” Russians like Armenian cheese, and according to another related Arka article, “the Armenian Cheese company was set to export 120 to 140 tons of cheese in Sept-Oct 2010 to Russia and 80 tons to the United States. However, nothing like that happened, since cheese prices jumped in Armenia, and it was decided to refrain from exporting cheese and postpone these plans for 2011.”

Good News for South Korea

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According to a recent FKI report (Federation of Korean Industries), there was good news for South Korea vis-à-vis investment opportunities, based on data assembled by the OECD (Organization for Economic Cooperation and Development). Indeed, in an article on the report, the region’s business investment growth “ranked no. 1 among the world’s developed market economies,” in 2010. Now, it just has to keep up this title. Indeed, South Korea’s facility investment escalated 21.3 percent on-year last year which rendered it the “highest increase among 23 countries checked and far higher than runner-up Estonia, which posted investment growth of 14.1 percent.” America came third and Britain, fourth.

South Korea Big Investments

South Korea’s investment in national accounts reached 116.8tr won, with a substantial amount of this being put into machinery and the remainder into transportation-related equipment. Indeed, machinery investment increased more than 26 percent on the grounds of the purchase of additional IT products, autos and manufacturing machinery in a one-year timeframe. Transportation sector investment increased 6.2 percent in 2010; most of this capital was spent on trucks and other autos primarily used for business.

2009 Figures

The financial crisis led to problems in 2009 such as a drop in facility investment in the OECD countries to 19.5 percent but with South Korea it was only 1.2 percent. As well in 2010 South Korea witnessed an additional 2.3 percentage points to last year’s economic escalation vis-à-vis investments in business, which, according to an FKI official, “represented a significant contribution to national growth.”