One-stop shops
Part 1: http://mondieu666.blogspot.com/2009/07/asian-banking-landscape-after-crisis.html
Commercial banks like to call it Corporate/Wholesale banking, which is essentially investment banking to a lesser extent. Activities such as debt issuance and underwriting are usually overlapped with those carried out by bulge brackt banks. In some emerging markets, commercial banks have demonstraed real strengths competing against their Wall Street conterparts, depsite the fact in tradtional invesment banking businesses such as M&A, Equity raisings, BBs still remain largely unchallenged.
Focus
I’ve chosen to focus on Standard Chartered Bank(STAN LN),one of the best performers throughtout the credit crisis(and possibly the only Anglo-Saxon bank which did not ask for government funding). The British bank generates over 90% of its revenue from the emerging markets and it’s rated A-AA+ by Moody’s and Fitch with a stable outlook. Standard&Poor’s gave its outlook a negative, likley due to the pending financial reform and current global uncertainty affecting the entire banking industry.
Progress in Asia
Contrary to HSBC and CITI, two of the largest foreign commerical banks in Asia, Standard Chartered is pushing heavily towards developing its investment banking division. In areas where Standard Chartered still trails behind, the bank’s management team has displayed some serious talanets in playing catch-ups with the big boys. Notably in 2009, tts investment banking unit has received a significnat boost through the acquisition of Cazenove Securities, A unit of JP Morgan and a star performer in Hongkong's debt capital market.
Compeitors:
·Given the bank’s emergining market focus and China’s growing prominance in the global capital market, Standard Chartered is well potisitoned to take advangtage of furture growth opportunities. The immenent threats to the bank’s growth come from external environment and compeition from the better-known rivals: CITI and HSBC.
·RBS seems to have exited the Asian markets, Barclay’s Asian strengths confine mostly within debt markets, BNP Paribas is universal but lacks reputation. Societe Generale has enough problems at home. Santander might have gone native in Latin America but the same recipe is difficult to follow here. JP Mogran and the likes of American banks need to deal with the financial reform bill first. ANZ is just too small.
External threats
·Dubai debt restructuing may force the bank to take a sizeable haircut, being one of the largest lenders in the region with 7.7billion exposure, it remaines to be seen how Standard Chartered, along with HSBC( also a big lender) deal with future uncertanity
·Revenue derived mostly from emerging markets= increased risk of concerntration.
·Dancing with China’s bubbles, urgently required of a plan-B in the case of emerging market overheating crisis.
·Financial reform bill
Shareholder Holdings:
Tamasek, the Singapore soveraign fund, is STAN’s largest stakeholder with 18.04%
CITI is 20% owned by the U.S governement due to subprime bailtout. 3.87% is held by the Singapore government
HSBC data not disclosed.
League Table
Below is a detailed breakdown of rankings of the three commercial banks(HSBC,CITI,STANDARD CHARTERED) for the first half of 2010, courtesy of Bloomberg
U.S bond market
STAN’s rankings in the international debt market remains within # 40-5. In th U.S and Europe. For example, the 2010 internaionl bond market sees STAN stand at #49, HSBC ranks # 3, CITI #8.
In the U.S bond market, STAN floats within the space of #20-#30, for a market dominated by bulge bracket banks. This is not at all bad eg. STAN’s ranks relatively high at #19 in the U S high yield market, albeit strill trailing HSBC#18 and CITI#4. in the corporate bond market STAN ranks #22.
International bond market
In global high yield market overall, JP Morgan leads by a mile. CITI#4, HSBC#14, STAN# 22, interestingly, in 2007 STAN was #46 and was absent over a two-year period( 2008-2009). Which’s quite a leap for a commerical bank one-third of the size of HSBC. Dubai Electrity& Water Authority being the biggest contributor to STAN’s underwirting revenue in 2010 (USD 250M@8.5%. With a 5-year maturity)
A few highlights in STAN’s primary regional markets
·In HK dollar bond market, Stan ranks # 3, HSB 1, Citi #11
·Singapore dollar-denominated bond, DBS # 1, HSBC#2, STAN#3, CITI not in top 10
·In India, STAN ranks #2-3 on a consistent basis, ahead of HSBC#6,CITI#13
·In Asia-Pacific ex-Japan G3 currency bond market, STAN at #11 leapt from last year #20, HSBC#2 and CITI#4, all three ahead of, RBS, BNP Paribas. STAN in G3 investment grade bond market(Asia ex Japan) also jumped from #22 in 2009 to #12 in 2010.
·An even more stellar performance is seen in corporate high yield market in Asia ex-Japan, where STAN ranks #2, second only to BoA Merill Lynch and ahead of GS,CITI, JP Morgan Credit Suisse,Deutsche Bank. HSBC ranks #14, STAN’s rankings in 2007 was #13 and the bank was abesnt from the league over the last two years.
·In Asia local currency bond market, STAN ranks consistently #2, second only to HSBC.
Equities Underwriting
STAN rankings move between #25-#35, nothing spetacular here, most businesses are shared amongst bulge brackets.
In the Chinese markets, Only Goldman Sachs(Through JV with Gaohua Secruities), UBS(Through JV with Beijing Securities)and Morgan Stanley(in the form of CICC) make it to the IPO league, presumably due to the fact that only local Chinese brokerages and joint ventures can underwrite local currency A-share listings.
M&A
The only spotlight for STAN within M&A advisory business is in India, ranks #4.(over 17% of market share), CITI #4, HSBC #7
Monday, June 7, 2010
Tuesday, April 27, 2010
Politicians
If Angela Merkel had a choice, she would either have bailed out Greece much earlier or responded to the bailout plan with a firm "Nein". Her indecisiveness is primarily due to the fact that German voters, most of the time do not understand the significance of rescuing an irresponsible, C-list economy, hence toeing the line between domestic sentiment and that of the EU members is somewhat a necessary political dance. Like what Mr. Obama did with healthcare and what he is doing now with the 1,400 page financial reform bill largely incomprehensible to 99% of the Americans.
Nicolas Sarkozy ,on the other hand, is acting in the interests of the EU as a whole. Granted, His eagerness to help out Greece, if successful, will benefit him a great deal. For starters, It will make him a stronger presidential candidate during the 2012 election against the out-going,soon-to-be-a-contender IMF president Dominic Strauss Kahn; the Greece rescue will also avoid hurting the France's banking industry which stands to lose the most in the event of a Greek default. Mr. Sarkozy can be convincingly good at dealing with finances, he is swift and knows when to act, more importantly, he's unequivocal about a united euro zone and unlike Mrs Merkel, he is determined to see it through. This makes him less popular, but the current state of the EU is desperately in need of someone who's decisive.
In less than two weeks' time, both will have to reach a consensus over the fate of Greece and, by extension, the fate of the euro zone. Everybody else is at their patience's end.
As for why I am fond of a humorous German
http://www.nytimes.com/2010/04/28/opinion/28iht-edbuhrow.html?ref=global
Nicolas Sarkozy ,on the other hand, is acting in the interests of the EU as a whole. Granted, His eagerness to help out Greece, if successful, will benefit him a great deal. For starters, It will make him a stronger presidential candidate during the 2012 election against the out-going,soon-to-be-a-contender IMF president Dominic Strauss Kahn; the Greece rescue will also avoid hurting the France's banking industry which stands to lose the most in the event of a Greek default. Mr. Sarkozy can be convincingly good at dealing with finances, he is swift and knows when to act, more importantly, he's unequivocal about a united euro zone and unlike Mrs Merkel, he is determined to see it through. This makes him less popular, but the current state of the EU is desperately in need of someone who's decisive.
In less than two weeks' time, both will have to reach a consensus over the fate of Greece and, by extension, the fate of the euro zone. Everybody else is at their patience's end.
As for why I am fond of a humorous German
http://www.nytimes.com/2010/04/28/opinion/28iht-edbuhrow.html?ref=global
Sunday, April 4, 2010
Fundamentally speaking, long the Aussie
Commodity currencies enjoyed a spectacular run in 2009 with the Aussie dollar in particular surging over 27%, the biggest rise among major currencies. Granted, the country’s fundamentals are hard to find fault and the Aussie only fell in sympathy with the rest of the world amid the financial crisis. With this year’s government stimulus weaning and sovereign default becoming reality, developed currencies and their host economies are likely to wobble. But for the Aussie there appears to be nowhere but up.
The Aussie strength is supported by a variety of factors at home and abroad, courtesy of a hawkish central bank, a relatively trouble-free financial system, anemic growth overseas and, China.
RBA
RBA’s interest rate moves against the backdrop of 2.7% GDP growth are just a beginning. Steady unemployment data and an overheating property sector lay the ground for more rate hikes and rightly justify Governor Glen Stevens’ TV appearance to give warming on speculative mortgage borrowing. February’s disappointing retail sales may prompt the bank to give the status quo a second thought, but it hasn’t dampened market interest rate expectations as the economy powers ahead. At least another 50bp rise by end of September has already been factored in the economy; Complacent or over-confident, to the Australians, the country’s outlook has never been better.
Banks' lending
In hindsight, Australians have reasons to cheer for missing out on the leveraged game that bruised many connected to the U.S subprime; now they will applaud the country’s economic divergence from the U.S and proximity to the growing Asia. The big 4 Aussie banks have minimal exposure to leveraged loans overseas and their balance-sheet repairing initiatives include reducing wholesale financing and shunning commercial lending in favor of retail deposits. The over-prudent pursuit for stable funds and the over-cautious treatment towards SME market is likely to stave off many businesses, but that’s a distant worry. The more palpable effect of selective lending tends to introduce more speculative capital in the property sector and further fuel up the Aussie dollar.
Overseas Growth
Lack of growth elsewhere has also been playing a role in pushing up the Aussie. The euro zone is beset by debt problems and the Euro still hasn’t found a floor; The U.K is still hung up on the possibility of having a hung government; Japan is planning for more QE to hold down rates, carry trade against Yen is back in vogue; the irony of the U.S taking the lead for global recovery in 2010 is intriguing, but commercial real estate is a ticking time bomb and can surprise any day when the Fed still has its hands tied on underwater mortgages in the residential market. Notwithstanding this week’s non-farm payroll, if current gold price and the country’s burgeoning deficit are any guide, confidence in the dollar may have been over-played by several notches.
M&A
An uneven recovery and European sovereign concerns has brought back Asian investors’ appetite for risky assets and the Aussie as an alternative foreign reserve to the dollar. Last year’s 155b worth of deals made Australia the hottest M&A market in Asia. Not surprisingly China got the lion’s share. The communist state has been actively encouraging FDI as a way to channel out hot money and uncover offshore growth opportunities. Already the 1st quarter has seen several multi-billion deals in the Australian resources and energy sector. There’s something else in it for the Chinese government too: troubled by currency risk and driven by a desire to diversify away from the dollar, CIC, the 200b Chinese sovereign fund has made bold moves all over the world since the second half of 2009. Its 421m investment in Goodman Group, an Australian property development group, is only a tip of the iceberg. The fund has become more transparent and strategically-conscious in terms of doling out for foreign assets of national interest. It will not be surprising to witness more deals done on a grander scale in 2010
Iron Ore
Even if future rate hikes by the RBA have been priced in the Aussie, a surprising turnaround on iron ore negotiation has most certainly not. China has managed an unrelenting stance towards the U.S over issues from climate change to trade imbalances, but the same can not be said with Australia. Iron ore is currently trading twice as high as it was priced a year ago and the big 3 miners are on track to gaining client's approval to accept a more market-oriented system. Quarterly pricing is already a default setting with Japanese steel makers, the Chinese and the European are likely to follow suit. Putting too much stock on Chinese steel union’s negotiating power is as naive as hoping the entire steel industry to speak with one voice. CISA ‘s effort to get a 45% discount on iron ore prices was undermined by a 33% acceptance from neighboring Japan and South Korea but more importantly, by the lack of coherence from the Chinese steel suppliers. The government’s relentless attempt for price cuts will prove to be futile in the face of an outdated benchmark system and the country’s own resources dependency.
Underlying Strength
The Aussie is currently trading below the 98c high in July 2008 and it’s simply retreading the same path that it has trodden before. The currency has been holding up well against market gyrations since March 2009. Even worries over Dubai and a shaky Greece have been proved too far removed to have any material impact on its run-up to parity. Market sentiment over the past year has also been overwhelmingly positive with commercial and large traders taking consistently long positions in the commodity futures market.
Australia is enshrined in emerging markets demand. In the absence of another Lehman-esque type of market seizure, the Aussie is likely to reach parity by the end of 2010.
The Aussie strength is supported by a variety of factors at home and abroad, courtesy of a hawkish central bank, a relatively trouble-free financial system, anemic growth overseas and, China.
RBA
RBA’s interest rate moves against the backdrop of 2.7% GDP growth are just a beginning. Steady unemployment data and an overheating property sector lay the ground for more rate hikes and rightly justify Governor Glen Stevens’ TV appearance to give warming on speculative mortgage borrowing. February’s disappointing retail sales may prompt the bank to give the status quo a second thought, but it hasn’t dampened market interest rate expectations as the economy powers ahead. At least another 50bp rise by end of September has already been factored in the economy; Complacent or over-confident, to the Australians, the country’s outlook has never been better.
Banks' lending
In hindsight, Australians have reasons to cheer for missing out on the leveraged game that bruised many connected to the U.S subprime; now they will applaud the country’s economic divergence from the U.S and proximity to the growing Asia. The big 4 Aussie banks have minimal exposure to leveraged loans overseas and their balance-sheet repairing initiatives include reducing wholesale financing and shunning commercial lending in favor of retail deposits. The over-prudent pursuit for stable funds and the over-cautious treatment towards SME market is likely to stave off many businesses, but that’s a distant worry. The more palpable effect of selective lending tends to introduce more speculative capital in the property sector and further fuel up the Aussie dollar.
Overseas Growth
Lack of growth elsewhere has also been playing a role in pushing up the Aussie. The euro zone is beset by debt problems and the Euro still hasn’t found a floor; The U.K is still hung up on the possibility of having a hung government; Japan is planning for more QE to hold down rates, carry trade against Yen is back in vogue; the irony of the U.S taking the lead for global recovery in 2010 is intriguing, but commercial real estate is a ticking time bomb and can surprise any day when the Fed still has its hands tied on underwater mortgages in the residential market. Notwithstanding this week’s non-farm payroll, if current gold price and the country’s burgeoning deficit are any guide, confidence in the dollar may have been over-played by several notches.
M&A
An uneven recovery and European sovereign concerns has brought back Asian investors’ appetite for risky assets and the Aussie as an alternative foreign reserve to the dollar. Last year’s 155b worth of deals made Australia the hottest M&A market in Asia. Not surprisingly China got the lion’s share. The communist state has been actively encouraging FDI as a way to channel out hot money and uncover offshore growth opportunities. Already the 1st quarter has seen several multi-billion deals in the Australian resources and energy sector. There’s something else in it for the Chinese government too: troubled by currency risk and driven by a desire to diversify away from the dollar, CIC, the 200b Chinese sovereign fund has made bold moves all over the world since the second half of 2009. Its 421m investment in Goodman Group, an Australian property development group, is only a tip of the iceberg. The fund has become more transparent and strategically-conscious in terms of doling out for foreign assets of national interest. It will not be surprising to witness more deals done on a grander scale in 2010
Iron Ore
Even if future rate hikes by the RBA have been priced in the Aussie, a surprising turnaround on iron ore negotiation has most certainly not. China has managed an unrelenting stance towards the U.S over issues from climate change to trade imbalances, but the same can not be said with Australia. Iron ore is currently trading twice as high as it was priced a year ago and the big 3 miners are on track to gaining client's approval to accept a more market-oriented system. Quarterly pricing is already a default setting with Japanese steel makers, the Chinese and the European are likely to follow suit. Putting too much stock on Chinese steel union’s negotiating power is as naive as hoping the entire steel industry to speak with one voice. CISA ‘s effort to get a 45% discount on iron ore prices was undermined by a 33% acceptance from neighboring Japan and South Korea but more importantly, by the lack of coherence from the Chinese steel suppliers. The government’s relentless attempt for price cuts will prove to be futile in the face of an outdated benchmark system and the country’s own resources dependency.
Underlying Strength
The Aussie is currently trading below the 98c high in July 2008 and it’s simply retreading the same path that it has trodden before. The currency has been holding up well against market gyrations since March 2009. Even worries over Dubai and a shaky Greece have been proved too far removed to have any material impact on its run-up to parity. Market sentiment over the past year has also been overwhelmingly positive with commercial and large traders taking consistently long positions in the commodity futures market.
Australia is enshrined in emerging markets demand. In the absence of another Lehman-esque type of market seizure, the Aussie is likely to reach parity by the end of 2010.
Friday, April 2, 2010
My Easter revelation
When Ben Bernanke succeeded Alan Greenspan as Chairman of the Federal Reserve, I could tell my professor was elated: he spent half of his introductory macroeconomics lecture talking about how he sent his buddy a congratulatory note upon receiving the news and how strongly he believed Mr. Bernanke was the best guy for the post. His elation was infectious. I leafed through my newly-purchased textbook which my professor and Mr. Bernanke co-authored, followed by a great sense of relevance which made me feel instantly privileged.
It was indeed a well-written textbook. but my lack of interest saw me almost flunk the final exam. The only thing I took away from a semester-long learning expereince was supply-demand equilibrium, which, according to my Engineering friend, translates into " stating the obvious."
Two years later, the sub-prime crisis broke out. No sooner had the market liquidity dried up than a deluge of rarely-heard/newly-invented terminologies began to inundate the press: TARP, mortgage buy-back, counter-party risk, liquidity trap, zombie banks, hyperinflation, too big to fail.... I felt like I sleep-walked through all my economic classes.
Last night, I picked up a local newspaper on my way home and came upon an inspiring tale: a Swedish homeless guy who wandered about the street collecting trash cans and consuming scraps died of a heart attack at age 60. Shortly after his death, his relatives discovered that he had a stock portfolio worth 1.1 million dollars. They also found in his "home" 150 bars of gold worth $450,000. A close friend of the homeless man told the reporter " He had lived a frugal life but he knew the stock market inside-out. He spent his days in the public library studying financial markets, he didn't buy newspapers because he could learn for free."
The moral of the two stories? University economics is, at best, misleading; at worst, a waste of time. If you are passionate, you will learn it yourself.
It was indeed a well-written textbook. but my lack of interest saw me almost flunk the final exam. The only thing I took away from a semester-long learning expereince was supply-demand equilibrium, which, according to my Engineering friend, translates into " stating the obvious."
Two years later, the sub-prime crisis broke out. No sooner had the market liquidity dried up than a deluge of rarely-heard/newly-invented terminologies began to inundate the press: TARP, mortgage buy-back, counter-party risk, liquidity trap, zombie banks, hyperinflation, too big to fail.... I felt like I sleep-walked through all my economic classes.
Last night, I picked up a local newspaper on my way home and came upon an inspiring tale: a Swedish homeless guy who wandered about the street collecting trash cans and consuming scraps died of a heart attack at age 60. Shortly after his death, his relatives discovered that he had a stock portfolio worth 1.1 million dollars. They also found in his "home" 150 bars of gold worth $450,000. A close friend of the homeless man told the reporter " He had lived a frugal life but he knew the stock market inside-out. He spent his days in the public library studying financial markets, he didn't buy newspapers because he could learn for free."
The moral of the two stories? University economics is, at best, misleading; at worst, a waste of time. If you are passionate, you will learn it yourself.
Wednesday, March 31, 2010
Health care
I am not intimately familiar with the newly-elected health care reform but it seems to me the U.S is moving closer towards socialism, which the country used to sneeze at prior to the economic crisis.
As an outsider, I am more concerned about the potential costs of the bill adding to the country's swelling deficit. Mr. Obama said the reform would not blow up the national coffers. Doubtful. The health care industry accounts for 16% of the country's GDP, even the slightest change could cause a material effect . Not to mention money spent on lobbying, debating, filibustering only to unconvincingly secure a marginal win over Republicans.
I don't like the argument of "long-term savings come later" from the beginning. For one, potential savings derived from the reform are built on the assumption that the economy is recovering as planned; Not likely and you know it. For the other, taking out future loans to pay for today's expenses? No thanks, not after the bust of the credit bubble.
Granted, it's Obama's biggest victory yet. But outside the states, not everyone is happy. Take China, for instance, which currently holds American debts roughly equivalent of the costs of the health care bill, or somewhere to the tune of $900biilions, That's on top of trillions of debts the U.S has amassed over the years,. Can the country's creditors, and I don't just mean China but also Japan, Germany and France expect their loans to be repaid in the foreseeable future?
Of course I am happy for the 32m Americans now that they are covered. In fact, I listened to BBC the other day and a black woman with pre-existing medical conditions was denied of insurance, she had to struggle through the past decade since she lost her job in 2001, now the passage of the health care bill had renewed her outlook on life and she was confident to find work again. That sounds great. But who will eventually pick up the bill? Probably not this woman.
Now that Mr. Obama has scored big time and that's not even half-way into his presidency. His next move is likely to be another reform. This time in the financial industry. Then what next? trade imbalances reform? Global warming reform? whatever his next move, Mr Obama is highly skilled at pushing ahead populist policies. But I think what he now needs to pay more attention to is the country's astronomical levels of debts. Otherwise he might very well run out of money for the next reform.
As an outsider, I am more concerned about the potential costs of the bill adding to the country's swelling deficit. Mr. Obama said the reform would not blow up the national coffers. Doubtful. The health care industry accounts for 16% of the country's GDP, even the slightest change could cause a material effect . Not to mention money spent on lobbying, debating, filibustering only to unconvincingly secure a marginal win over Republicans.
I don't like the argument of "long-term savings come later" from the beginning. For one, potential savings derived from the reform are built on the assumption that the economy is recovering as planned; Not likely and you know it. For the other, taking out future loans to pay for today's expenses? No thanks, not after the bust of the credit bubble.
Granted, it's Obama's biggest victory yet. But outside the states, not everyone is happy. Take China, for instance, which currently holds American debts roughly equivalent of the costs of the health care bill, or somewhere to the tune of $900biilions, That's on top of trillions of debts the U.S has amassed over the years,. Can the country's creditors, and I don't just mean China but also Japan, Germany and France expect their loans to be repaid in the foreseeable future?
Of course I am happy for the 32m Americans now that they are covered. In fact, I listened to BBC the other day and a black woman with pre-existing medical conditions was denied of insurance, she had to struggle through the past decade since she lost her job in 2001, now the passage of the health care bill had renewed her outlook on life and she was confident to find work again. That sounds great. But who will eventually pick up the bill? Probably not this woman.
Now that Mr. Obama has scored big time and that's not even half-way into his presidency. His next move is likely to be another reform. This time in the financial industry. Then what next? trade imbalances reform? Global warming reform? whatever his next move, Mr Obama is highly skilled at pushing ahead populist policies. But I think what he now needs to pay more attention to is the country's astronomical levels of debts. Otherwise he might very well run out of money for the next reform.
Friday, March 19, 2010
Currencies
One way or another, either EU or IMF will bail out Greece. Germany will be reluctant but pressure on the country's responsibility to save its brethren is high and things will get worse if they don't. German exports primarily flow within the eurozone, when looking outside the continent, nothing has significantly improved in the broader market since January.How can Germany stay calm when its own survival depends on the survival of other consumption-oriented economies like Greece? Kicking a profligate member out of the zone is just populist talk, a break-up of the euro is worse. For starters, devaluation of new sovereign currencies in response to export competitiveness will have Germany cry foul for decades to come. EUR should stabilize any day now when a concrete rescue package(or a concrete promise to rescue) is on the table, but euro-wide sovereign crises will likely to make the currency go for another dive before coming back to 1.5-1.6 at the end of 2010.
AUD/JPY, carry trade back in vogue? Japanese households are not earning enough in their own economy and have been looking at outside opportunities. Evidently There has been strong trends of yen-denominated managed funds making their way into the high-yielding overseas markets such as Australia, where cash rate stands at 4% and will likely to rise another 50bp within the next 6 months. AUD/USD will probably challenge parity once again. It was very close to reaching its goal pre-crisis. Meanwhile the Fed is still stubbornly cautious about rate hikes so there will probably be another 6-9 months of doing nothing other than refraining the "extended period" cliche, further flaming the Aussie.
One caveat is what looks about to happen in China. the Chinese steel industry is secretly suffering from overcapacity but everybody does seem happy about buying commodities non-stop. Rio Tinto reconciliation with Chinalco paves way to another promising JV so presumably everything is fine again? Another sticking point is China's unrelenting attitude towards iron-ore pricing. Should that persist and China decides to slow down or finds ways to diversify its resource dependency, AUD can kiss dollar-parity goodbye.
Taken the country's internal problems into account, the currency trade will be even more risky. NAB, the big 4 Aussie bank, has recently revealed debt losses totaling more than 1,6billion, the other three have skeletons hidden in their closets too. Moreover, Australian households are incredibly leveraged and banks heavily rely on foreign financing. Let's see if the debt bubble will prick this year.
AUD/JPY, carry trade back in vogue? Japanese households are not earning enough in their own economy and have been looking at outside opportunities. Evidently There has been strong trends of yen-denominated managed funds making their way into the high-yielding overseas markets such as Australia, where cash rate stands at 4% and will likely to rise another 50bp within the next 6 months. AUD/USD will probably challenge parity once again. It was very close to reaching its goal pre-crisis. Meanwhile the Fed is still stubbornly cautious about rate hikes so there will probably be another 6-9 months of doing nothing other than refraining the "extended period" cliche, further flaming the Aussie.
One caveat is what looks about to happen in China. the Chinese steel industry is secretly suffering from overcapacity but everybody does seem happy about buying commodities non-stop. Rio Tinto reconciliation with Chinalco paves way to another promising JV so presumably everything is fine again? Another sticking point is China's unrelenting attitude towards iron-ore pricing. Should that persist and China decides to slow down or finds ways to diversify its resource dependency, AUD can kiss dollar-parity goodbye.
Taken the country's internal problems into account, the currency trade will be even more risky. NAB, the big 4 Aussie bank, has recently revealed debt losses totaling more than 1,6billion, the other three have skeletons hidden in their closets too. Moreover, Australian households are incredibly leveraged and banks heavily rely on foreign financing. Let's see if the debt bubble will prick this year.
Saturday, March 13, 2010
Political bubble bust more likely
Last year, house prices in the big Chinese cities noticeably rocketed. A friend of mine sold an investment property located in an affluent neighborhood in Shanghai and pocketed twice as much the price offered a year ago. According to her, that’s a modest gain. But housing euphoria was certainly not confined to coastal areas. I lived in a 2-tier capital city of 1.7m population. A week ago the local government auctioned off a CBD land-use right, registering the highest land sale price in the province's history.
Few can argue a housing bubble is dangerously growing on the back of the 585billion stimulus. Yet at the annual National People Congress, government officials talked as if they did not live in china for the most part of last year. Confidently citing a rather comical figure released by the National Bureau of Statistics: the officials spoke loud and clear that, on average, house prices rose by a mere 1.5% in 2009.
Equally comical is the reaction from the representatives of real estate developers, who claimed they weren't any better last year and took the chance to educate the public that on average,real estate industry only yielded a very modest 12% profit on each house sold. But unlike the no-nonsense government, they probably have to explain the 65 real estate developers who have made it into the Forbes China's Richest 100 last year.
However bubbly it might seem, doomsayers may disappoint themselves hanging on the belief that China’s property market is due for a free-fall. Crucially different from the then U.S sub-prime and now housing collapse in Spain is that China’s residential real estate ranks easily among the least leveraged marketplaces in the world: at least one-thirds of a property value is willingly paid for and timely settled in cash; half the homeowner population is mortgage-free. This prudent practice reflects the self-reliant Chinese psyche and prepares a cushion against an imminent interest rate shock.
The central government has also stepped up efforts to alleviate the pain: Chinese banks have been told twice this year to shore up their books and restrict lending; a promise to allocate more land for affordable housing topped this year’s directive. The government now requires a down payment of 50% for land purchases and bans construction of villas. In short, there is a bubble, but it’s manageable.
Property crash aside, social turbulence abounds. There's no denying that almost every newly converted urbanite can ill-afford a house. This again has sparked waves of citizens’ protests following last year’s controversial nationalization of mines in Shanxi province. The refrain “Guojingmintui” (The state advances, citizens recede) has since joined the most-discussed list of topics, second only to the housing mania. Meanwhile, local governments continue to profit from land sales, developers still favor grandiose homes instead of flats, and speculators continue to hoard and flip vacant properties. It’s no secret that the average Chinese now stomachs a pent-up resentment the size of the property sector towards the state.
Unlike in the past, the government is finding no support everywhere it looks. Heavily criticized by outsiders for its currency policy, social unrest is also brewing fast at home. What to do? Appreciating the Yuan discharges only some hot air at the expense of the country’s fragile exports; taking an unyielding stance towards the currency only stokes inflation, interest rate hikes only bring more pain to the real estate market.
What China needs, in the long term, is the creation of more retail avenues through which hot money can be channeled abroad. It’s high time Chinese detached themselves from the mindset that a house is a bar of gold and be given more accessible opportunities to invest. For now, the government needs more resolve to curb property stockpiling through imposing a much more severe holding tax. That will bleed local governments and developers, but those gamblers should have seen that coming a decade ago.
Few can argue a housing bubble is dangerously growing on the back of the 585billion stimulus. Yet at the annual National People Congress, government officials talked as if they did not live in china for the most part of last year. Confidently citing a rather comical figure released by the National Bureau of Statistics: the officials spoke loud and clear that, on average, house prices rose by a mere 1.5% in 2009.
Equally comical is the reaction from the representatives of real estate developers, who claimed they weren't any better last year and took the chance to educate the public that on average,real estate industry only yielded a very modest 12% profit on each house sold. But unlike the no-nonsense government, they probably have to explain the 65 real estate developers who have made it into the Forbes China's Richest 100 last year.
However bubbly it might seem, doomsayers may disappoint themselves hanging on the belief that China’s property market is due for a free-fall. Crucially different from the then U.S sub-prime and now housing collapse in Spain is that China’s residential real estate ranks easily among the least leveraged marketplaces in the world: at least one-thirds of a property value is willingly paid for and timely settled in cash; half the homeowner population is mortgage-free. This prudent practice reflects the self-reliant Chinese psyche and prepares a cushion against an imminent interest rate shock.
The central government has also stepped up efforts to alleviate the pain: Chinese banks have been told twice this year to shore up their books and restrict lending; a promise to allocate more land for affordable housing topped this year’s directive. The government now requires a down payment of 50% for land purchases and bans construction of villas. In short, there is a bubble, but it’s manageable.
Property crash aside, social turbulence abounds. There's no denying that almost every newly converted urbanite can ill-afford a house. This again has sparked waves of citizens’ protests following last year’s controversial nationalization of mines in Shanxi province. The refrain “Guojingmintui” (The state advances, citizens recede) has since joined the most-discussed list of topics, second only to the housing mania. Meanwhile, local governments continue to profit from land sales, developers still favor grandiose homes instead of flats, and speculators continue to hoard and flip vacant properties. It’s no secret that the average Chinese now stomachs a pent-up resentment the size of the property sector towards the state.
Unlike in the past, the government is finding no support everywhere it looks. Heavily criticized by outsiders for its currency policy, social unrest is also brewing fast at home. What to do? Appreciating the Yuan discharges only some hot air at the expense of the country’s fragile exports; taking an unyielding stance towards the currency only stokes inflation, interest rate hikes only bring more pain to the real estate market.
What China needs, in the long term, is the creation of more retail avenues through which hot money can be channeled abroad. It’s high time Chinese detached themselves from the mindset that a house is a bar of gold and be given more accessible opportunities to invest. For now, the government needs more resolve to curb property stockpiling through imposing a much more severe holding tax. That will bleed local governments and developers, but those gamblers should have seen that coming a decade ago.
Monday, February 1, 2010
Greece
Greece looks set to get a bailout, others in the EU look ready to give it one. At least that's the underlying tone expressed by the European leaders at this year's Davos.
First, Greek Prime Minister George Papandreou has rolled out a seemingly unrealistic austerity plan to bring the nation’s burgeoning deficit down to 3%( currently 12%-13%) by 2012. Yet Jean-Claude Trichet, the hawkish-sounding president of ECB, remains convinced of its feasibility, much more than his own exit strategy.
Second, talk of kicking Greece out of the EU has been unequivocally dismissed; primarily for fear of a break-down in the euro zone. French Finance Minister Christine Lagarde has made it clear that EU members are jointly accountable to each other and echoed Jean-Claude’s view that Greece stays no matter what.
Third, EU leaders worry more about the collective debt status of the region than a single indebted member. With most countries' deficits hovering around 7% in the euro zone; at 12.7%%, Greece may not seem so wild. Although Germany has announced there won’t be any bailout for EU members, when push comes to shove, rules can always be bent. Furthermore, the resultant drop in confidence for the euro is not all bad in the eye of the European's biggest economy, whose exports are given a needed breather as the home currency continues to lose ground.
Fourth, the delay of an aid brings back memories of the Dubai World crisis. So it hardly seems cynical to view it as the EU leaders’ way of telling the rascal(s) that fiscal disciplines are needed and profligacy will not go unpunished. Greece’s perennial fudging with public finances culminated last year when it shocked the EU with a drastically upward revision of its deficit. Now comes the time for the wider community to rescue a repeat offender, taxpayers must be convinced that a lesson has been learned. Increased transparency is a pre-requisite for the aid to be implemented and monitored effectively.
Perhaps most importantly, and perhaps why George Papandreou was quick to distance Greece from rumors about China’s funding, is that the EU does not want its garden grow more of Asian herbs. If two weeks of doing nothing with its 2.4 trillion foreign reserves can generate sufficient interest to cover a €25-billion obligation, then a national deficit this magnitude is really just paltry by China’s standards. But €25 billions of debt is enough to invite a Greek tragedy. The downside of having China as your creditor is that political strings are often part of the deal, especially when a rescue comes from a sovereign fund.
At a time when the euro region is being tested for its monetary strength, losing Greece to China will be strategically unthinkable. Members in the euro zone entered the crisis together and they will have to show solidarity and fight their way out together. Not least to prove to the U.S that the more humane version of European capitalism is better, but to face up to the emerging giant that’s wielding too much power around the globe.
Yet bailout brings unwanted consequences, the universal ones being moral hazard and public anger, but some are more specific to the euro zone.
Saving Greece will mean a violation of its no-bailout policy and butterfly effect on peripheral countries with ballooning debts. The former obstacle can be circumvented via a more implicit rescue package not in the same vain of Abu Dhabi's; but spooky investors scurrying away from the weaker economies will cause collateral damage within the region. Worse if it ripples throughout the rest of the world. If European leaders don’t clear the air soon enough by assuring the market what the EU’s next move will be, we could very well lose a recovery before we could even save the Greeks.
First, Greek Prime Minister George Papandreou has rolled out a seemingly unrealistic austerity plan to bring the nation’s burgeoning deficit down to 3%( currently 12%-13%) by 2012. Yet Jean-Claude Trichet, the hawkish-sounding president of ECB, remains convinced of its feasibility, much more than his own exit strategy.
Second, talk of kicking Greece out of the EU has been unequivocally dismissed; primarily for fear of a break-down in the euro zone. French Finance Minister Christine Lagarde has made it clear that EU members are jointly accountable to each other and echoed Jean-Claude’s view that Greece stays no matter what.
Third, EU leaders worry more about the collective debt status of the region than a single indebted member. With most countries' deficits hovering around 7% in the euro zone; at 12.7%%, Greece may not seem so wild. Although Germany has announced there won’t be any bailout for EU members, when push comes to shove, rules can always be bent. Furthermore, the resultant drop in confidence for the euro is not all bad in the eye of the European's biggest economy, whose exports are given a needed breather as the home currency continues to lose ground.
Fourth, the delay of an aid brings back memories of the Dubai World crisis. So it hardly seems cynical to view it as the EU leaders’ way of telling the rascal(s) that fiscal disciplines are needed and profligacy will not go unpunished. Greece’s perennial fudging with public finances culminated last year when it shocked the EU with a drastically upward revision of its deficit. Now comes the time for the wider community to rescue a repeat offender, taxpayers must be convinced that a lesson has been learned. Increased transparency is a pre-requisite for the aid to be implemented and monitored effectively.
Perhaps most importantly, and perhaps why George Papandreou was quick to distance Greece from rumors about China’s funding, is that the EU does not want its garden grow more of Asian herbs. If two weeks of doing nothing with its 2.4 trillion foreign reserves can generate sufficient interest to cover a €25-billion obligation, then a national deficit this magnitude is really just paltry by China’s standards. But €25 billions of debt is enough to invite a Greek tragedy. The downside of having China as your creditor is that political strings are often part of the deal, especially when a rescue comes from a sovereign fund.
At a time when the euro region is being tested for its monetary strength, losing Greece to China will be strategically unthinkable. Members in the euro zone entered the crisis together and they will have to show solidarity and fight their way out together. Not least to prove to the U.S that the more humane version of European capitalism is better, but to face up to the emerging giant that’s wielding too much power around the globe.
Yet bailout brings unwanted consequences, the universal ones being moral hazard and public anger, but some are more specific to the euro zone.
Saving Greece will mean a violation of its no-bailout policy and butterfly effect on peripheral countries with ballooning debts. The former obstacle can be circumvented via a more implicit rescue package not in the same vain of Abu Dhabi's; but spooky investors scurrying away from the weaker economies will cause collateral damage within the region. Worse if it ripples throughout the rest of the world. If European leaders don’t clear the air soon enough by assuring the market what the EU’s next move will be, we could very well lose a recovery before we could even save the Greeks.
Friday, January 29, 2010
French National Identity VS Burqa Ban
Unlimited religious freedom is a beautiful concept but, in reality, it always has to be subordinate to the interests of the ruler. France is a secular state so it's no surprise to learn that advocating one's religion in public is generally regarded as unwelcome. Cultural integration, while it should not be forced upon, it should be respected. Just like the old saying: when in Rome, do as the Romans do." Foreigners in Saudi Arabia must obey the local customs, or they get stoned. In France, the most severe penalty you get from wearing a burqa is a fine of a few thousand dollars. Therefore some people's argument of intolerance must be established on a more convincing ground.
But is it a different matter when a civilized nation has sunken to the level of an autocrat? I think not. Democracy is never about complete freedom, rather than a system which is more willing to let different voices be heard. Once again, anything has a limit: sensitive issues which pose a threat to national security, which intimidate the majority of citizens' state of being, which violate the country's long-held principles that have been firmly entrenched since the Bastille Revolution, should not be obfuscated by political correctness. Boundary-less democracy is anarchy. No country can survive without a implicit set of rules.
Opponents of the ban fervently defend their right of wearing certain garments where in their own land they do not wear them at all. Proponents who view burqa as a submissive symbol for Muslim women could also run the risk of forcefully imposing western values on a ethnic minority. The controversy intensifies as people keep on guessing on both camps' motives and, as soon as they find a single fault of one another, they label it with either "terrorism" or "racism". In my opinion, we argue too much on a moot point. For those who wear burqa in France, I am afraid you have to give that up; for populists who enjoy arguing no end, you can now climb down your moral high-horse and for once, let the common logic be part of your response: if the values of a country appear conflicting with yours, you are welcome to go elsewhere.
The french deserve kudos for having raised a startling tone, which stands in contrast to the condescending attitude held by most Anglo-Saxons countries, where religious beliefs are now wielding too much influence that people will go to any lengths to show their tolerance for fear of being labeled as a bigot. Little wonder even a woman who, famously mixed secular matters with religious meaning on national TV could still be considered a worthy presidential candidate.
Would I want my message from God delivered to me by a politician? Duh!
But is it a different matter when a civilized nation has sunken to the level of an autocrat? I think not. Democracy is never about complete freedom, rather than a system which is more willing to let different voices be heard. Once again, anything has a limit: sensitive issues which pose a threat to national security, which intimidate the majority of citizens' state of being, which violate the country's long-held principles that have been firmly entrenched since the Bastille Revolution, should not be obfuscated by political correctness. Boundary-less democracy is anarchy. No country can survive without a implicit set of rules.
Opponents of the ban fervently defend their right of wearing certain garments where in their own land they do not wear them at all. Proponents who view burqa as a submissive symbol for Muslim women could also run the risk of forcefully imposing western values on a ethnic minority. The controversy intensifies as people keep on guessing on both camps' motives and, as soon as they find a single fault of one another, they label it with either "terrorism" or "racism". In my opinion, we argue too much on a moot point. For those who wear burqa in France, I am afraid you have to give that up; for populists who enjoy arguing no end, you can now climb down your moral high-horse and for once, let the common logic be part of your response: if the values of a country appear conflicting with yours, you are welcome to go elsewhere.
The french deserve kudos for having raised a startling tone, which stands in contrast to the condescending attitude held by most Anglo-Saxons countries, where religious beliefs are now wielding too much influence that people will go to any lengths to show their tolerance for fear of being labeled as a bigot. Little wonder even a woman who, famously mixed secular matters with religious meaning on national TV could still be considered a worthy presidential candidate.
Would I want my message from God delivered to me by a politician? Duh!
Thursday, December 17, 2009
Copenhagen
Copenhagen is less than 24 hours from ending. For those who have not been following the progress closely, rest assured, you didn’t miss much except for a few attention-seeking remonstrations and over-dramatic display of tantrum from some negotiators.
Presumably, in keeping with the tone of the summit, the majority of people at the conference have decided to put “Climate-Gate” on the back burner and instead, focus on accomplishing the one and only mission: produce a legally binding successor to Kyoto Protocol. In layman’s terms it means accurately measure and effectively control your carbon emissions. Unsurprisingly, the path is obstructed by conflicts of interest between two camps.
The impact of the man-made global warming, so we have chosen to believe, is disastrous: island nations may sink underwater; citizens in African countries may die from food shortage. But there are less obvious victims even in the developed world. Most scientists will agree that Climate Change is literally an Armageddon that spares no one on the planet; most world leaders, however, pay too little attention to one of the most-affected groups whose members are torn between living in green and living to survive. - The average Chinese citizen.
In a likely scenario where climate talk in Copenhagen eventually breaks down, The Chinese government will earn the luxury of monitoring its own carbon emission without international pressure. In return, Western economies will get more ammunition for the next wave of China bash and more power to rally stone-throwers. The average Chinese, in addition to getting rising energy prices and lower standard of living, will continue to live through life as the biggest earth-polluter; an ugly image no even Tiger Woods can bear.
If, the last minute of the conference was kissed by an angel and China became officially rule-bound,(the possibility of The U.S agreeing to provide sufficient financial assistance to developing world required multiple angels’ blessings), The Chinese officials would have no choice but scramble to meet the pre-set targets. And the result of which would be another government-led spectacle put up at the expense of Joe Public.
The first spectacle stunned every Wall Street analyst and temporarily defied economic theory: China put off the magical 8% GDP growth, an arbitrary number built on looming asset bubbles, doubtful statistics and the gloomy moods of the disgruntled citizens who ardently stand by the claim “GuoJinMingTui”. Yet Dis-accords all swiftly swept under the rug, the Chinese way.
So why be surprised by what they can do now? Sure, meeting international emission targets may require efforts to merge a few hundred more mines, nationalize a few thousand private enterprises or even shed a few more million jobs, but the tricks in the bag are more than plenty to put on another act. Bottom line: a target is met and outsiders will never have to know how they achieve it.
Presumably, in keeping with the tone of the summit, the majority of people at the conference have decided to put “Climate-Gate” on the back burner and instead, focus on accomplishing the one and only mission: produce a legally binding successor to Kyoto Protocol. In layman’s terms it means accurately measure and effectively control your carbon emissions. Unsurprisingly, the path is obstructed by conflicts of interest between two camps.
The impact of the man-made global warming, so we have chosen to believe, is disastrous: island nations may sink underwater; citizens in African countries may die from food shortage. But there are less obvious victims even in the developed world. Most scientists will agree that Climate Change is literally an Armageddon that spares no one on the planet; most world leaders, however, pay too little attention to one of the most-affected groups whose members are torn between living in green and living to survive. - The average Chinese citizen.
In a likely scenario where climate talk in Copenhagen eventually breaks down, The Chinese government will earn the luxury of monitoring its own carbon emission without international pressure. In return, Western economies will get more ammunition for the next wave of China bash and more power to rally stone-throwers. The average Chinese, in addition to getting rising energy prices and lower standard of living, will continue to live through life as the biggest earth-polluter; an ugly image no even Tiger Woods can bear.
If, the last minute of the conference was kissed by an angel and China became officially rule-bound,(the possibility of The U.S agreeing to provide sufficient financial assistance to developing world required multiple angels’ blessings), The Chinese officials would have no choice but scramble to meet the pre-set targets. And the result of which would be another government-led spectacle put up at the expense of Joe Public.
The first spectacle stunned every Wall Street analyst and temporarily defied economic theory: China put off the magical 8% GDP growth, an arbitrary number built on looming asset bubbles, doubtful statistics and the gloomy moods of the disgruntled citizens who ardently stand by the claim “GuoJinMingTui”. Yet Dis-accords all swiftly swept under the rug, the Chinese way.
So why be surprised by what they can do now? Sure, meeting international emission targets may require efforts to merge a few hundred more mines, nationalize a few thousand private enterprises or even shed a few more million jobs, but the tricks in the bag are more than plenty to put on another act. Bottom line: a target is met and outsiders will never have to know how they achieve it.
Sunday, November 29, 2009
Chinese Racism Towards Westerners
FT Chinese just posted an interesting article on Chinese racism towards westerners. This is an interesting cultural perception that seems commonplace in China. See article http://www.ftchinese.com/story/001029993
This prompts me to think, do foreigners who make no effort to learn a local language deserve the same respect as those who took the pain?
The question seems particularly pertinent in today's world where China's economic clout has become anything but insignificant. When we come to a foreign shore, we are to be expected and we expect ourselves to adapt to the way of living of a local, the length of time spent on assimilating, however varied, often ranges from simply learning to communicate with basic linguistic knowledge to immersing oneself in the nuances of a foreign culture. I believe, the majority of people overseas, have at least made some effort in that regard with the aim to make our communication more effective and our lives more enjoyable. Some of us have been less successful and eventually reverted back to our own group of ethnicity. But overall, Chinese, along with other nationalities who were not inherently advantaged by the almighty lingua-franca, have shown tremendous respect towards our adopted country by taking to learn English.
Now I won't deny a large part of our motivation is still due to the fact of English global status. Realistically speaking, people have to learn the language if they are to compete on a global stage. Little wonder English will continue to strengthen its position in the world of commerce because the rest of the world will continue to put the effort to learn it.
What I can't stand are native speakers who make absolute no effort in communicating and expect everyone to converse with them in English. It's simply not acceptable when one does not adapt to a foreign environment and instead expects the other way around. I am always extremely tolerant towards people who can't hold themselves in Chinese fluently enough in a business setting with locals, but you should know that, every one of us has the right to not give you the satisfaction of superiority by choosing not to speak English with you in our everyday activity.
It really saddens me to learn that there are still many who carry with themselves the mindset that English is the only acceptable lingua-franca of the world and therefore those who speak it have no need to learn other languages. The notion, albeit statistically correct, is very culturally ignorant. When it comes to business, people might find the excuse to limit their communicative conducts in English for convenience and simplicity purposes. I will give you that, but if at a casual gathering, where the emphasis is focused on relation-building and fun-producing, and you waltz into the room, still expecting to be accommodated in your mother tongue when you come up to chat with me? Isn’t that a bit of a….ehh,,buzzkill for both of us?
The argument about Chinese being the hardest language to learn is vastly exaggerated. True, it can not be more different to the Germanic language system from which English originated. But do you really think learning thousands of irregularities embedded in English is a piece of cake for an Asian? I’ll tell you that, as a constantly evolving language of Germanic and Latin descent, it doesn’t make it any easier for us to learn than you do Chinese. And I don’t even expect you to reach a level of fluency in Chinese, the basic conversational ability of any language only requires some 6,000 words to make possible, with all the university qualifications you obtained and all the time you agonized over a racist taxi driver, you don’t even care to learn to speak a little?
So is this an act of racism? Maybe, racial prejudice manifests itself in many forms, but racism arises from ignorance about one’s culture is something you can easily avoid by simply not restricting to living in that little bubble of yours. Why did the taxi driver choose to do business with a local person over you? I can think of many plausible explanations that do not involve racial profiling. But let’s travel a more extreme route for the sake of the argument:
If you have gotten on the taxi, what would you have said to the driver with zero knowledge of English, if you could mutter out a few Chinese words here and there clear enough to instruct him where you wanted to go, my kudos to you, but what if the driver misunderstood and you two started to argue for an hour, all this time he could have made several trips for more money, right?
Of course any kind of racial stereotyping should not be encouraged, in your case, it could be that I risk generalizing westerners as strictly monolingual and ignoring those who are more linguistically competent, but hey, communication is a two-way street, would you expect a taxi driver to learn English just to broaden his foreign client base or you as an educated expat to learn some Chinese to make your life easier?
Based on your description, I think it’s a reasonable guess your friend in question can hardly speak Chinese: she could very well yell in the local language to draw attention of the taxi driver, if he heard it and still ignored your friend, he’s a fucking racist, but obviously your friend did not even attempt to make herself noticed in a way he could understand, because she couldn’t.
I have come to notice close-minded people often tend to shy away from efforts to get to know more about foreign culture. And the fear of difference results in too many cultural misunderstandings. I like to clarify that I don’t hate English speakers, I like them in so many ways; I like to applaud westerners who can speak Chinese even with an abysmal vocabulary and broken grammar, I applaud them because I have been in that painful shoes of learning their language, because I think they are brave enough to engage in self-deprecating which makes them more likable and, most importantly, I applaud them because their willingness to learn about me through my cultural identity, helps break down the arrogant impression the rest of the world imposes upon English speakers.
Now I understand a little more why Paris is also infamous for being hostile towards people who don’t speak French, parce que ceux qui ne font pas l'effort de comprendre, ne méritent pas notre respect.
This prompts me to think, do foreigners who make no effort to learn a local language deserve the same respect as those who took the pain?
The question seems particularly pertinent in today's world where China's economic clout has become anything but insignificant. When we come to a foreign shore, we are to be expected and we expect ourselves to adapt to the way of living of a local, the length of time spent on assimilating, however varied, often ranges from simply learning to communicate with basic linguistic knowledge to immersing oneself in the nuances of a foreign culture. I believe, the majority of people overseas, have at least made some effort in that regard with the aim to make our communication more effective and our lives more enjoyable. Some of us have been less successful and eventually reverted back to our own group of ethnicity. But overall, Chinese, along with other nationalities who were not inherently advantaged by the almighty lingua-franca, have shown tremendous respect towards our adopted country by taking to learn English.
Now I won't deny a large part of our motivation is still due to the fact of English global status. Realistically speaking, people have to learn the language if they are to compete on a global stage. Little wonder English will continue to strengthen its position in the world of commerce because the rest of the world will continue to put the effort to learn it.
What I can't stand are native speakers who make absolute no effort in communicating and expect everyone to converse with them in English. It's simply not acceptable when one does not adapt to a foreign environment and instead expects the other way around. I am always extremely tolerant towards people who can't hold themselves in Chinese fluently enough in a business setting with locals, but you should know that, every one of us has the right to not give you the satisfaction of superiority by choosing not to speak English with you in our everyday activity.
It really saddens me to learn that there are still many who carry with themselves the mindset that English is the only acceptable lingua-franca of the world and therefore those who speak it have no need to learn other languages. The notion, albeit statistically correct, is very culturally ignorant. When it comes to business, people might find the excuse to limit their communicative conducts in English for convenience and simplicity purposes. I will give you that, but if at a casual gathering, where the emphasis is focused on relation-building and fun-producing, and you waltz into the room, still expecting to be accommodated in your mother tongue when you come up to chat with me? Isn’t that a bit of a….ehh,,buzzkill for both of us?
The argument about Chinese being the hardest language to learn is vastly exaggerated. True, it can not be more different to the Germanic language system from which English originated. But do you really think learning thousands of irregularities embedded in English is a piece of cake for an Asian? I’ll tell you that, as a constantly evolving language of Germanic and Latin descent, it doesn’t make it any easier for us to learn than you do Chinese. And I don’t even expect you to reach a level of fluency in Chinese, the basic conversational ability of any language only requires some 6,000 words to make possible, with all the university qualifications you obtained and all the time you agonized over a racist taxi driver, you don’t even care to learn to speak a little?
So is this an act of racism? Maybe, racial prejudice manifests itself in many forms, but racism arises from ignorance about one’s culture is something you can easily avoid by simply not restricting to living in that little bubble of yours. Why did the taxi driver choose to do business with a local person over you? I can think of many plausible explanations that do not involve racial profiling. But let’s travel a more extreme route for the sake of the argument:
If you have gotten on the taxi, what would you have said to the driver with zero knowledge of English, if you could mutter out a few Chinese words here and there clear enough to instruct him where you wanted to go, my kudos to you, but what if the driver misunderstood and you two started to argue for an hour, all this time he could have made several trips for more money, right?
Of course any kind of racial stereotyping should not be encouraged, in your case, it could be that I risk generalizing westerners as strictly monolingual and ignoring those who are more linguistically competent, but hey, communication is a two-way street, would you expect a taxi driver to learn English just to broaden his foreign client base or you as an educated expat to learn some Chinese to make your life easier?
Based on your description, I think it’s a reasonable guess your friend in question can hardly speak Chinese: she could very well yell in the local language to draw attention of the taxi driver, if he heard it and still ignored your friend, he’s a fucking racist, but obviously your friend did not even attempt to make herself noticed in a way he could understand, because she couldn’t.
I have come to notice close-minded people often tend to shy away from efforts to get to know more about foreign culture. And the fear of difference results in too many cultural misunderstandings. I like to clarify that I don’t hate English speakers, I like them in so many ways; I like to applaud westerners who can speak Chinese even with an abysmal vocabulary and broken grammar, I applaud them because I have been in that painful shoes of learning their language, because I think they are brave enough to engage in self-deprecating which makes them more likable and, most importantly, I applaud them because their willingness to learn about me through my cultural identity, helps break down the arrogant impression the rest of the world imposes upon English speakers.
Now I understand a little more why Paris is also infamous for being hostile towards people who don’t speak French, parce que ceux qui ne font pas l'effort de comprendre, ne méritent pas notre respect.
Monday, October 12, 2009
Emerging VS Developed
An interesting article written by Marko Dimitrijevic, founder and chief investment officer of Everest Capital.
WHY THE PHRASE EMERGING MARKETS NO LONGER APPLIES
The term emerging markets is obsolete. They represent half of the world's economy; their financial markets are large and liquid, with volatility, corporate governance and government policies very similar to those of developed markets. The traditional distinctions between emerging and developed markets, once pronounced, have disappeared.
Because of their high growth rates, emerging markets are now too large to be ignored. On a purchasing power parity basis, China's gross domestic product is larger than Japan's, India's is larger than Germany's and Russia's is larger than the UK's. The BRICs (Brazil, Russia, India and China) are as large as developed Europe. Surprisingly, the rest of the emerging markets (ex-BRICs) collectively command a greater share of the global economy than the US.
Even though emerging markets have very large economies, the common misconception is that they have fairly small, illiquid and volatile financial markets. This is definitely not the case. Because of faster economic growth, the out- performance of their financial markets in the past decade and the fact that many private and government-owned companies have recently been publicly listed, the market capitalisation of emerging markets has grown considerably and in total now represents 30 per cent of world market capitalisation, as much as the US. China now has a larger market cap than Japan. South Korea and Taiwan, two emerging industrial powerhouses, together have a larger market cap than Germany, and Brazil has a larger market than Australia.
Liquidity in these markets has also increased dramatically in recent years. So far in 2009, Chinese exchanges have traded more than the NYSE, South Korea more than France and India more than Canada.
Another argument against emerging markets is that they are too volatile and have unstable, unpredictable governments that leave them susceptible to coups or revolutions. In reality, however, volatility levels in emerging markets now nearly match those in developed markets. Even in the extreme market environment of 2008, emerging markets and developed market volatilities were very similar. So in terms of size, liquidity and volatility, emerging markets are on a par with developed markets and should not be discriminated against because of antiquated notions around these criteria.
Another popular knock against emerging markets is their reputation for poor corporate governance and less market-friendly government policies.
These criticisms are no longer warranted. Not only have emerging markets risen to higher corporate governance standards, but developed markets' aura of quality in this area has also diminished considerably. Enron, Parmalat, WorldCom and Countrywide represent only a handful of examples in this regard.
Further, while the west lectured Asia and Latin America in the 1990s on government policy best practices, the reverse is occurring now as the US and Europe create a striking display of inconsistent and erratic policies often favouring special interests. The handling of, and policies surrounding, Lehman Brothers, Railtrack, GM, Fannie Mae, Northern Rock and Opel are just some recent case studies to ponder.
There is, however, one measure that highlights a clear and continuing distinction between emerging and developed markets: growth.
In the period 2003-2009, sales for “Emerging Markets, Inc” (an aggregation of publicly traded companies in emerging markets) grew 11 per cent annually versus 5 per cent for “World, Inc”.
We believe that this differential in growth will continue for three main reasons: the differentials in GDP and population growth will be maintained for the foreseeable future; many emerging markets' basic needs have not yet been met, so starting from a lower base, consumption and investments will continue to grow faster; and from a risk standpoint their companies were and continue to be less leveraged, with higher interest coverage ratios than those in developed markets.
In fact their coverage ratios have improved significantly as interest rates in emerging markets have come down dramatically.
Emerging markets should matter a great deal for all investors, now and for the rest of our investing lives. Yet today they still represent only 12 per cent of the MSCI All Country World Index, while representing 30 per cent of the world's market capitalisation, 50 per cent of the world's economy and the world's best growth prospects. Investors focusing on benchmarks will miss this opportunity.
The end of emerging markets is here. Investors who don't catch on to this reality risk being left behind.
WHY THE PHRASE EMERGING MARKETS NO LONGER APPLIES
The term emerging markets is obsolete. They represent half of the world's economy; their financial markets are large and liquid, with volatility, corporate governance and government policies very similar to those of developed markets. The traditional distinctions between emerging and developed markets, once pronounced, have disappeared.
Because of their high growth rates, emerging markets are now too large to be ignored. On a purchasing power parity basis, China's gross domestic product is larger than Japan's, India's is larger than Germany's and Russia's is larger than the UK's. The BRICs (Brazil, Russia, India and China) are as large as developed Europe. Surprisingly, the rest of the emerging markets (ex-BRICs) collectively command a greater share of the global economy than the US.
Even though emerging markets have very large economies, the common misconception is that they have fairly small, illiquid and volatile financial markets. This is definitely not the case. Because of faster economic growth, the out- performance of their financial markets in the past decade and the fact that many private and government-owned companies have recently been publicly listed, the market capitalisation of emerging markets has grown considerably and in total now represents 30 per cent of world market capitalisation, as much as the US. China now has a larger market cap than Japan. South Korea and Taiwan, two emerging industrial powerhouses, together have a larger market cap than Germany, and Brazil has a larger market than Australia.
Liquidity in these markets has also increased dramatically in recent years. So far in 2009, Chinese exchanges have traded more than the NYSE, South Korea more than France and India more than Canada.
Another argument against emerging markets is that they are too volatile and have unstable, unpredictable governments that leave them susceptible to coups or revolutions. In reality, however, volatility levels in emerging markets now nearly match those in developed markets. Even in the extreme market environment of 2008, emerging markets and developed market volatilities were very similar. So in terms of size, liquidity and volatility, emerging markets are on a par with developed markets and should not be discriminated against because of antiquated notions around these criteria.
Another popular knock against emerging markets is their reputation for poor corporate governance and less market-friendly government policies.
These criticisms are no longer warranted. Not only have emerging markets risen to higher corporate governance standards, but developed markets' aura of quality in this area has also diminished considerably. Enron, Parmalat, WorldCom and Countrywide represent only a handful of examples in this regard.
Further, while the west lectured Asia and Latin America in the 1990s on government policy best practices, the reverse is occurring now as the US and Europe create a striking display of inconsistent and erratic policies often favouring special interests. The handling of, and policies surrounding, Lehman Brothers, Railtrack, GM, Fannie Mae, Northern Rock and Opel are just some recent case studies to ponder.
There is, however, one measure that highlights a clear and continuing distinction between emerging and developed markets: growth.
In the period 2003-2009, sales for “Emerging Markets, Inc” (an aggregation of publicly traded companies in emerging markets) grew 11 per cent annually versus 5 per cent for “World, Inc”.
We believe that this differential in growth will continue for three main reasons: the differentials in GDP and population growth will be maintained for the foreseeable future; many emerging markets' basic needs have not yet been met, so starting from a lower base, consumption and investments will continue to grow faster; and from a risk standpoint their companies were and continue to be less leveraged, with higher interest coverage ratios than those in developed markets.
In fact their coverage ratios have improved significantly as interest rates in emerging markets have come down dramatically.
Emerging markets should matter a great deal for all investors, now and for the rest of our investing lives. Yet today they still represent only 12 per cent of the MSCI All Country World Index, while representing 30 per cent of the world's market capitalisation, 50 per cent of the world's economy and the world's best growth prospects. Investors focusing on benchmarks will miss this opportunity.
The end of emerging markets is here. Investors who don't catch on to this reality risk being left behind.
Tuesday, October 6, 2009
Sunday, September 20, 2009
A sustainable recovery is hard to come by
1. Growth in a couple of European economies can not fill the gap for global demand. A closer look at the data will tell you that most recovery in the manufacturing sector is due to inventory depletion which's highly cyclical and as a result, does not provide support for a sustainable global recovery. Further more, Countries in the East and in the South, notably Spain, whose banks are still facing enormous balance sheet problems due to continuing writedowns in real-estate loans, will be a big drag in years to come.
2. UK central bank's QE appears extremely unsustainable. Quantitative easing floods the economy with abundant liquidity, it provides temporary relief but to the extent the majority of banks are still reluctant to lend, private consumption has not been getting the anticipated boost,this is the opposite of BOE's intent. The bigger question is: How confident are you of any central governement's ability to come up with and execute "exit strategies"? ie. When is appropriate to phase out stimulus and how?
3. The US economy is on a rebound, indeed. But what we have witnessed the last two months, the growth in auto sales, a larger proportion is attributed to the govt's "Cash for Clunkers" program. Car industry is crucial to the US economy,unfortunately it's faced with many challenges: diminishing profit margin due to consumer switching to smaller cars, industry regulation on carbon emissions and the more pressing issue: OVERCAPACITY. It sure didn't help when none of the struggling auto makers have been let die thanks to the unlimited supply of taxpayer's money.
4. China can only do so much to power its economy, as long as global demand has not come back, it's unlikely it will maintain growth over a sustainable period of time. China's efforts to adjust global trade imbalances and its focus on domestic consumption will have an impact, but the impact is likely to be short-lived if the rest of the world can not keep up with it.
2. UK central bank's QE appears extremely unsustainable. Quantitative easing floods the economy with abundant liquidity, it provides temporary relief but to the extent the majority of banks are still reluctant to lend, private consumption has not been getting the anticipated boost,this is the opposite of BOE's intent. The bigger question is: How confident are you of any central governement's ability to come up with and execute "exit strategies"? ie. When is appropriate to phase out stimulus and how?
3. The US economy is on a rebound, indeed. But what we have witnessed the last two months, the growth in auto sales, a larger proportion is attributed to the govt's "Cash for Clunkers" program. Car industry is crucial to the US economy,unfortunately it's faced with many challenges: diminishing profit margin due to consumer switching to smaller cars, industry regulation on carbon emissions and the more pressing issue: OVERCAPACITY. It sure didn't help when none of the struggling auto makers have been let die thanks to the unlimited supply of taxpayer's money.
4. China can only do so much to power its economy, as long as global demand has not come back, it's unlikely it will maintain growth over a sustainable period of time. China's efforts to adjust global trade imbalances and its focus on domestic consumption will have an impact, but the impact is likely to be short-lived if the rest of the world can not keep up with it.
Tuesday, July 21, 2009
Sovereign fund's stock picking
Not that CIC, China’s foreign investment vehicle, needs further capital injection, but it’s reassuring to know the 200-billion fund is guaranteed unlimited ammunition should things get bigger in the next 3-5 years. Given the dampening demand in exports and China’s increasing exposure to currency risk, sovereign investment will give the central government more scope for maneuvering the flow of its foreign reserves. This will not only mitigate Yuan’s upward pressure, but also help to adjust global trade imbalances.
CIC’s recent recruitment of 30 market experts is part of the plan to move away from external management and towards a more active investment style. Apparently CIC still has a thing for Private Equity, but the expensive lesson with Blackstone is probably what prompted the corporation from the backseat to the driver’s spot: as the newly established Private Equity department within CIC will tell you that it now prefers to be proactive than stay a passive investor. Consequently, CIC investment portfolio will likely have a heavy weighting on industries that are more sustainable and forward-looking.
Renewable energy, among others, will be of the greatest interest to the fuel-guzzling nation. While it may be surprising to some, China’s environmental efforts in the past 3 years will put many developed economies to shame. Indeed, China can not sustain rapid growth without paying more for the environmental costs, which is why a lot of green initiatives are now being orchestrated by the government’s stimulus program, as well as by investors who have a long –term perspective on the country’s energy needs.
The bright outlook presents many opportunities to invest in green technologies; both domestic and overseas start-ups are ideal candidates and most are desperately in need of funding. In addition to offering high returns, green stocks also have the advantage of being less politically controversial, thus allowing relatively easy sources of capital inflow.
Sovereign fund investments in sensitive industries are not so promising, however. The fallout of Chinalco deal suggests that China’s overseas ventures will continue to be under great scrutiny. In 2009, the issue surrounding sovereign fund transparency has been addressed by many through portfolio and internal structure disclosure, but a government-controlled investment still resembles a Private Equity investment: much unknown and little regulation. Rather than try to convince, perhaps a more feasible way would be investing in small doses to avoid conflicts of interest.
As the reserve currency’s concern continues to dominate the central government’s agenda; CIC will, over time, prove to be the most effective tool to help China diversify away from the dollar.
CIC’s recent recruitment of 30 market experts is part of the plan to move away from external management and towards a more active investment style. Apparently CIC still has a thing for Private Equity, but the expensive lesson with Blackstone is probably what prompted the corporation from the backseat to the driver’s spot: as the newly established Private Equity department within CIC will tell you that it now prefers to be proactive than stay a passive investor. Consequently, CIC investment portfolio will likely have a heavy weighting on industries that are more sustainable and forward-looking.
Renewable energy, among others, will be of the greatest interest to the fuel-guzzling nation. While it may be surprising to some, China’s environmental efforts in the past 3 years will put many developed economies to shame. Indeed, China can not sustain rapid growth without paying more for the environmental costs, which is why a lot of green initiatives are now being orchestrated by the government’s stimulus program, as well as by investors who have a long –term perspective on the country’s energy needs.
The bright outlook presents many opportunities to invest in green technologies; both domestic and overseas start-ups are ideal candidates and most are desperately in need of funding. In addition to offering high returns, green stocks also have the advantage of being less politically controversial, thus allowing relatively easy sources of capital inflow.
Sovereign fund investments in sensitive industries are not so promising, however. The fallout of Chinalco deal suggests that China’s overseas ventures will continue to be under great scrutiny. In 2009, the issue surrounding sovereign fund transparency has been addressed by many through portfolio and internal structure disclosure, but a government-controlled investment still resembles a Private Equity investment: much unknown and little regulation. Rather than try to convince, perhaps a more feasible way would be investing in small doses to avoid conflicts of interest.
As the reserve currency’s concern continues to dominate the central government’s agenda; CIC will, over time, prove to be the most effective tool to help China diversify away from the dollar.
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