Author: eastwestmarkets

America Taking Pride in Economy Again

The US has definitely had its issues with its economy in the last few years.  But now it seems that things are looking up, especially when analyzing economic activity over the last year.  The country’s S&P 500 Index is said to be doing better than its counterparts in Frankfurt, Hong Kong, Sao Paulo, Shanghai and Tokyo by at least 15 percent.  As well, Dow industrials increased 135.63 points on housing and employment.  In addition, figures for overall employment are good too with less Americans filing jobless claims.

The Only Way is Up

In truth, things were looking pretty dreary for the American economy a few years ago.  It all started to go disastrously wrong in 2007 with the mortgage crisis. Thereafter, there was the plummet in stocks.  This was followed by high levels of unemployment, and the collapse of the motor industry.  Banks closed, and it seemed at one point that it was becoming almost impossible to hang on to any job. So, truthfully, the situation had no place else to go but up.

Asia Helping America

Today, in 2011-12, America’s economy is definitely going in the right direction.  This is in spite of Europe’s debt crisis. Further, since there are now worries about inflation along with a drop in growth in Asia, this is positive for America’s economy too.  Japan’s auto industry is suffering somewhat since until recently it was a world leader. This changed due to the overpriced Japanese Yen.  But again, this is good  news for America as Honda has decided to move four of its manufacturing units out of the country, to America and Mexico.  And what this has translated to, is sales of Honda (in America) being just a tad behind those of Korean Hyundai vehicles.  Great news for Americans working with Asians leading to the hope of more business deals ahead.

 

Asia’s High End Art Market

Hong Kong has been instrumental in boosting Asia’s art market over the last few years, especially with its 300 percent increase between 2009-10.  This is thanks to the wealthy Chinese who have been enthusiastically purchasing art, resulting in Hong Kong becoming a global art sales center.  It seems like art and other alternative investment options – such as wine – have in general been on the rise irrespective of global financial misfortunes such as the collapse of Lehman Brothers three years ago.

Asia’s Rich Getting Richer

It seems that the wealthy individuals in the Asia region are just increasing their financial worth.   For example, the region is even beating Europe, standing at $10.7tr., whereas Europe is only up to $10.2tr.  Art investment definitely has a lot going for it, being a little different, enjoyable and having pretty good returns. As well what is also good news for Asia is that vis-à-vis the art market, it has not been impacted by the Euro Zone debt crisis.  Indeed, the Mei Moses Global Art Index found almost a 12 percent increase in 2011 to November.

One art consultant, Bobby Mohseni, noted, “it may not be a good time for sellers but it's an excellent time for buyers. During late 2008 and 2009, I highly advised clients to buy. With Chinese contemporary art, some prices have gone exceptionally high and that's just over a decade … so it's best to look at upcoming or mid-tier artists.”

In addition, confidence in China’s contemporary art market remains quite high, even though the same confidence is lacking in the European and American counter markets.  In other words, Asia does not have to feel the negative impact of what is going on in the western world – as has been seen through its art market.

Japan Enters Europe

Panasonic Plans to Globalize Phones

Panasonic is planning on entering the European market with its smartphone in March 2012.  As well, over the next four years, the company hopes to ensure 15 million units are ready for overseas sales, with Europe being the start of its entry into the world market.

Panasonic has made this decision on reflection of how the cellphone market is increasingly moving toward smartphone use globally.  In this frame, it seems that expectations for growth overseas are quite substantial.  Panasonic is not intending to miss out.  In addition, the company has created a new smartphone business model and in the future will be expanding its offerings.  The company hopes that its sales hit 1.5m in Europe in the next fiscal year and over the next four years for 15 million units to reach Europe, Asia and America.

In light of this goal, a few months ago, Panasonic established the Systems & Communications Company (SNC). Via this branch, the electronics firm will be able to fully expand its internal resources, such as the factory it has in Malaysia. At the moment, this is where the phones are made for the Japanese market, which will now be the primary manufacturer for Panasonic’s first global model.

Asia Playing Big Brother on Euro-Finance Meetings

Europe:  Asia Is Watching You

Over the last week there have been a variety of important meetings in Europe over which Asia has been keeping its proverbial Big Brother eye on.  Indeed, it may even be somewhat more than just overseeing the progress of the meetings.  According to UBS Asia Pacific’s chief investment strategist, Yonghao Pu, “at the moment, we [Asia] are kind of a hostage to what’s going on in Europe.”  Due to activities in the global economy, China’s hand is being forced in a way it’s not especially fond of.

Beijing’s Banking

Beijing has had to make some changes.  It already removed some of its demands for rural banks and is now doing the same with its major banks, in an effort to facilitate banks giving out loans while offsetting the global economy’s ripple effects.   

Beijing has also been quite firm in its insistence that it will not be fishing the Eurozone out of its hole either.  As well, due to less demand, there is decreased manufacturing  in China.  Since Europe is the biggest export market of China, if the region goes into trouble economically, this will negatively impact all Asian exports. Indeed, according to China’s vice minister for foreign affairs, Fu Ying, “the argument that China should rescue Europe does not stand, as reserves are not managed that way.” 

The good news for Asia is however,  that the region is doing better financially than Europe. Still, it needs to be aware of the fact that when the Eurozone cracks, it could encounter problems too.  Keep watching out for Euro meetings to get an idea of what Asia’s next financial step should be.

Asia Impacting US Stocks

Again, America needs to count on Asia.  American stock prices at the end of last week encountered mega-instability once global markets were concerned that financial worries in the east may end up in the west, in particular Europe and America.

No country stands alone.  It’s not just Asia and America/Europe.  Right now, concerns have spread to Argentina and Brazil over potential Venezuelan currency devaluation.  This could result in a huge crisis for the entire Latin American region.

But still it’s Asia that has the power to result in worldwide economic problems.  Due to what’s been going on in the financial sphere in the eastern part of the region, huge instability could engulf US and European countries and even result in an abandonment of capitalism.

Further, if American lawmakers are unable to agree on necessary budgetary cuts, the country could end up encountering another credit downgrade.  While there is fear of limited growth in Asia, there is the possibility that mining and energy companies could go into decline.  One trader from London Capital Spreads said that it is likely markets will open lower due to Europe and America’s sovereign-debt concerns…

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.