Regional News

Ford India Invests Millions to Manufacture Compact SUV ‘EcoSport’

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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

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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

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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

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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.

Yahoo In Talks to Sell Asian Shares

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Yahoo, a major U.S.-based internet company, may sell a significant amount of its Asian investments. According to inside sources, the plan can put $17 billion on the holdings, putting the value of the Asian stakes at more than the entire company’s worth as of September.

The transaction will be discussed at a board meeting later today, as part of an intensive review of the company following the departure of former chief executive Carol Bartz.

One source, who is directly involved in discussions, has revealed that valuations are still unclear, and that so far offers have fallen short of $17 billion. Another source added that whether Yahoo executives choose this option or not, the deal will take at least three weeks to close.

Reports have stated that Yahoo’s primary negotiations are related to stakes in Yahoo Japan, as well as Alibaba, the Chinese e-commerce group. Yahoo’s partners in Asia, Alibaba and Softbank, made the initial offer to buy back the 40% stake in Alibab and the 35% in Yahoo Japan this past October. Today’s discussions will focus on Yahoo keeping a 15% share in Alibaba for future gains in China, with all remaining holdings to be sold.

North Korean’s Kim Jong Il’s Death Sends Asian Stocks Tumbling

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The shocking death of North Korea’s leader has sent Asian stocks tumbling, deepening concerns regarding the financial market.

Kim Jong Il’s death was announced last night in Pyongyang, the North Korean capital. Stability in the region has been compromised, and the reclusive regime will now undergo a major change in leadership.

South Korea’s Kospi index initially fell 4.1%, but later regained to trade 3.1% at 1,782.50. The won also slid 1.6% against the dollar. Aside from that common safe haven, the yen and the euro sank as well.

Japan’s Nikkei 225 index fell 1% at 8,314.44, while the Hand Seng plunged 2.5% to 17,833.42. Similarly, the Shanghai Composite Index fell 2.6%.

Tensions on the Korean peninsula have heightened, and South Korea has put both its police and military on high alert. President Lee Myung-Bak also convened national Security Council meetings. Japanese leaders are keeping an eye on markets, and are in touch with the U.S.

“We need to prepare for any contingencies,” said Jun Azumi, according to Kyodo News Agency.

Citigroup Plans to Hire More Staff and Boost Trade Finance Services in Asia

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Anthony Nappi, head of global transaction services at Citigroup, said the bank is now looking to increase its staff and boost its trade finance service business in Asia.

“Trade finance is a key area for us- we are going to hire more trade transactors because a business perspective trade has been the outstanding performer for us,” he told Dow Jones Newswires.

“My own personal aspiration,” he said, “is to double the size of the business every three to five years… We continue to want to grow at double digits. That’s our aspiration.”

Nappi went on to explain that there are 50-70 new positions that he intends to fill throughout the whole global trade service business in markets like China, Malaysia, India and Australia. These regions have a strong demand for cash management. Now, Citigroup’s Asian GTS business has more than 5,200 employees.

Thailand Remains Popular Investment Focus

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World Bank country director Annette Dixon stated that Thailand is still an investment hotspot at a press conference this week.

“Globally and regionally, Thailand remains an attractive investment destination. We won’t expect a lot of business to relocate,” she said, adding that the government should work to support the flood recovery efforts as opposed to populist policies.

The Bank of Thailand has been urged to reduce the policy rate to strengthen the economy in the past. Dixon said that given the high volatility of the world’s economy, Thailand “should be extremely prudent.”

Ekaterina Vostroknutova, a senior economist for East Asia and the Pacific region, explained that developing countries in the sector are currently preoccupied with growth, and have put less focus on inflation, thus ignoring policy rates.

“Central banks in Asia are waiting to see how things unfold,” she said.

China’s Factor Sector Drops to Three-Year Low

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China’s factory sector decreased dramatically, the most in 32 months, in fact, as the economy continues to weaken and concerns regarding a global recession heighten.

The severe fall in the HSBC flash PMI from 51 to 48 this past month reflects domestic weakness as a result of less output and new orders, even as exports increase. The flash PMI was the lowest since 2009. Added to the already unstable world economy, the news has sent financial markets into a quiet frenzy.

“I’m not sure if it (PMI) is a tipping point, but I think it adds to the evidence,” said HSBC economist Qu Hongbin. Beijing has initiated several measures already, aimed at helping small businesses, to support the economy. The sharp drop in inflationary pressure shows that the city still has hope if it brings in additional, special measures.

“There remains no need to panic,” Hongbin said. “Easing inflation provides room for more easing measures, which will keep China on track for a soft landing.”

Asian Currencies Fall Amid Investors’ Borrowing Costs Concerns

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As financiers worry that borrowing costs in Europe will worsen the debt crisis, South Korea’s won and Indonesia’s rupiah set a falling trend in Asian currencies.

The won declined after bonds from France, Belgium, Spain and Austria climbed to the highest premiums since the euro was established, and the rupiah fell to its lowest since September.

“We think Asian currencies will depreciate by the end of the year because of the euro-zone fiscal crisis,” explained Dariusz Kowalczyk of Credit Agricole CIB. “Risk aversion will dominate trading in the near term.”

Italy’s bond yields increased more than 7%, propmpting Greece, Ireland and Portugal to call for bailouts. Meanwhile, Spain and Belgium’s debt auctions were not as successful as planned.

“Investors are buying the dollar amid all the uncertainties we are seeing in the global environment,” said Roy Paul of Federal Bank. “The rupee’s slide may induce intervention  from the central bank.”