Month: November 2011

Plummeting Japanese Stocks

Things are not looking good for Japanese stocks.  Lowest closes were recorded for Nikkei 225 and the Topix Index in over two years.  The problem currently is that people are worried America’s congressional committee just won’t be able to agree on a deficit-cutting measure.  As well, Japanese export numbers dropped, so that didn’t help confidence in their stocks either.

According to one equities manager at Pengana Capital Ltd., Australia, Tim Schroeders, “there’s likely to be a continuing impasse and people will focus on the stability of the U.S. politically.” He predicts that people are just going to wait it out – not act until they get real clarity as to what their next move should be.

Getting the Economy Back on Track

Making Concessions Between East and West

According to leaders in the Asia Pacific market, if the world economy is going to recover and stay on an even keel, then establishing freer trade is crucial.  In a meeting reported in an article in ABC News, real progress seems to have been made on developing an American-backed regional trade bloc. 

The entire world economy would really get a boost if a Pacific free trade area was forged.  The idea received support from Mexican and Canadian leaders who joined Japan in “expressing support for a deal that has received a cool reception from rising power China.”  President Barack Obama has been delighted by this news as he put this high on his list for the yearly Asia-Pacific Economic Cooperation summit.  As well, it follows the announcement made by Japan (the world’s third largest economy) that it is seeking to become part of the Trans-Pacific Partnership talks.

The meeting was very timely, given that the economy is not in the greatest shape right now. This has encouraged greater openness by the group to cooperate on any ways that may lead to a strengthening of the economy.  As well, the meeting centered on different methods to increase the likelihood that green-based economic policies are put in place to “ensure energy security.”

So, a lot is on the economic table between east and west markets right now.  In a sense, the worse the economy does, the more committed economic leaders become to making things better through compromise and cohesion.  That ultimately could be the key that’s needed to ensure overall economic recovery and progress.

Europe Versus China

Are Europe’s Financial Woes Hurting China?

It’s bad enough that Europe is in a huge financial crisis, but when it starts impacting countries halfway around the world, then something has to be done. This is exactly what is happening right now.  Still, it’s not all bad news since China recently had some good results vis-à-vis its stocks rising.  There are many factors that will affect a country’s stock and it seems that currently, the focus is on inflation which is getting better.  With this in mind, the country’s policymakers could be set to reduce its tight grip on monetary policies.  This will definitely be helpful.  Nonetheless, there is a great amount of recovery in Europe that is needed for the citizens living there and for its impact on Asia and the whole of the eastern region.

China’s Power Producers

According to the 21st Century Business Herald, the cabinet in China is reviewing the possibility of raising the price of electricity that is paid to power plants.  This resulted in a rally led by Huaneng Power International Inc.  But the International Monetary Fund (IMF) has asked for there to be an increase in banking supervision as there are now greater risks with lending along with a jump in property prices.

China’s Presence in the West

Still, China is not being put off and is developing a true presence in the west.  The country currently  holds 25 percent of US Treasury Bonds (reserved for foreigners) and is busy pushing its way into Europe as well. It is exercising caution though.  While at one time it was the main capitals like Frankfurt, London, Paris and Washington which were taking  the main role, it now seems China is stepping on these financial centers’ toes.  So when Europe and other parts of the west start encountering issues that are too problematic to solve alone, it might just be the case that it will be China to come to its rescue.

China’s Wine Industry: East or West?

So it might be time for the Chinese to start getting a taste of their own medicine as it were…or trusting their own vineyards to produce good enough wines for them to drink.  Indeed, according to Jancis Robinson, a world-renowned wine authority, the Chinese have been making enormous strides in the field over the last ten years or so.  Although the Chinese are still very much enjoying and looking for fine wines from other countries, it could be possible that their own wines are really stepping up.  This shouldn’t be too surprising since numbers now show that China is among the top five grapevine growers in the world!

Things have definitely come a long way for China and wine.  As Robinson pointed out, when she first began seeking out fine wines in the country – back in 2002 – she didn’t exactly leave inspired, to put it mildly.  But just in 2010, she felt “heartened” having tasted various wines from the region that were “quite respectable.”  However, still only a very small portion of the country’s wines falls into this category; the vast majority of China’s wines is somewhat acidic and thin, and not impressive at all despite the country’s ripe, clean and fruity grapes. Robinson is extremely qualified to make this judgment since she is one of only approximately 300 Masters of Wine in the world, according to the Institute of Masters of Wine. 

So, it remains to be seen whether China will work hard at what appears to be a not-so-bad start and try to really make a go of things in the fine wine industry, or, whether it will continue to rely on imports from the west to satisfy its palettes.  Currently it looks like the latter may win out since its imports from regions such as Australia, France, Italy and South America, increased 57 percent from January to September of this year.  Europe seems to be the overall popular hive for wine imports to China. 

Clearly it becomes a bit of a chicken and egg situation.  The more China imports, the less likely it will be that individuals will be driven to develop their own wine to try to compete with these.

Oasis Management Hong Kong: Making Comeback with Other Asia Hedge Funds

The Hong Kong hedge fund sector has been seeing a steady improvement in business as more and more proprietary traders are choosing to move their funds from banks to Hong Kong based hedge funds. This is a sign, say observers, that the industry has turned a corner, boosted by a recent Securities and Futures Commission report that points out that the industry is making a nice comeback in recent weeks.

Following a slow-down and shrinkage of the hedge fund marketplace in 2008 analysts now see a sharp rise in funds flowing from banks to hedge funds in addition to an uptick in the number of international hedge fund managers who are setting up their offices in Hong Kong and elsewhere in Asia.

A yearly report, the Hong Kong hedge fund survey, which is published by the Hong Kong Securities and Futures Commission (SFC) shows clearly that AUM (assets under management) are moving upward. In September 2010 hedge fund assets in Hong Kong were valued at $63.2 billion, a substantial increase from March 2009 when assets in hedge funds reached only $55.3 billion.

“We think it is genuine growth. 2008-09 was a difficult period for the Asian hedge fund industry,” said Giselle Lee, executive director at Man Investments in Hong Kong.

“The industry is now in a growth phase evidenced by two things. Firstly, lots of proprietary traders from investment banks. Some banks have eliminated these desks or they have shrunk dramatically, so lots of prop traders have set up their own shops. And lots of global funds which run Asian books have decided to open an Asian office,” explained Lee.

Free-trade US-Asia Agreements

It has to be good news for everyone. When the recent free-trade agreement came into effect between America, Colombia, Panama and South Korea, it had to be welcomed by everyone in the east and west.  Clearly this will encourage trade from east to west and vice versa.  When there are no longer trade fees, it has to be a huge incentive to make additional purchases.

The organization Club for Growth would for sure welcome this news.  This body works hard for less government intervention and more freedom for the people.  Free trade is good for all the countries involved.  Many other organizations such as the U.S. International Trade also see the benefit in this law as it will open many new doors for America and is likely to lead to a growth in the country’s exports by up to $10.9bn in the first year following the law’s implementation.  Furthermore, the new trade law is expected to save a staggering 38,000 jobs in America, according to the country’s Chamber of Commerce.

There is the flip side of the coin though.  And of course the law is coming under some sort of criticism. Others see that the disadvantages outweigh the benefits as American clothe-manufacturers are losing out to their Chinese counterparts who can get away with paying lower wagers.  Still, ultimately it’s best for the consumer as prices are kept to a minimum. And if it happens to be China, then China will get the work and Americans will have to find other ways to compete if they want to stay in the game.  Plus, in time China may increase their wages as well as Chinese shoppers become wealthier, which will bring the west back into a competitive mode.

No matter what disadvantages there are, this trade agreement is ultimately beneficial to both east and west markets and that is what all economic critics ultimately must realize.  Even if it does come with some problems (what economic modern law doesn’t?) it still has too much to offer for it be fought against.