Asia-Pacific

The miracle of China’s disappearing dividend

22 Jan 2013

The country’s economic boom has not been matched by its stock markets. State-owned companies only grow by accumulating more assets. Both are signs that China’s investment splurge is generating poor returns. But while real interest rates remain negative, change may prove elusive.

F&N takeover saga reaches mostly happy ending

22 Jan 2013

The bid battle for the Singaporean conglomerate ended without fireworks. Even so, the $11.2 bln valuation leaves investors with a 40 pct return over seven months, and loser OUE with a $41 mln break fee. The pressure is now on the victorious Thai bidder to prove the numbers work.

Which weapon will BOJ choose to slay deflation?

21 Jan 2013

Japan’s central bank is poised to transform itself into a hyper-unorthodox monetary warrior. Whether its new role is convincing or not will depend on its choice of a clever battle plan. The BOJ has a number of choices in its arsenal, but some are more lethal than others.

Caterpillar’s Chinese lesson: dig below top line

21 Jan 2013

Getting stung by accounting fraud is unfortunate. But Caterpillar’s $580 mln write-down - three-quarters of the price it paid for ERA Mining just last year - suggests a bigger misjudgment. The Chinese machine maker’s potential was clear, but so was the low quality of its growth.

China’s role in Rio Tinto chief’s downfall

18 Jan 2013

Tom Albanese’s $38 bln Alcan deal was a bet China would use more aluminium and close down its unprofitable producers. Instead, it has propped them up, helping push prices down and the CEO out of his job. It’s a reminder that China’s state capitalism plays by different rules.

China’s growth model disrupts the world order

17 Jan 2013

China has made mercantilism seem sustainable, shown that poor countries can be powerful, and provided leadership without ideas. If those disruptions prove successful, economists will have explaining to do. Either way, it leaves the world with a financial problem.

Thailand’s unsustainable boom is piling up risks

16 Jan 2013

After seven anxiety-filled years, the Southeast Asian nation is awash with optimism. Populist fiscal policies are stuffing citizens’ pockets with cash, which they aren’t coy to spend. But inflation pressures are rising, and government mollycoddling is hurting competitiveness.

China nears its own “Great Stink” moment

15 Jan 2013

Bad air stands in the way of good development. The damage to health and buildings undermine the benefits of rapid economic growth. Victorian London’s sewage problems offer a blueprint for change. There, reform became a priority when the smell got up the elite’s noses too.

India in depth: Crying out for corporate bonds

15 Jan 2013

Using the country’s bank-dominated financial system to fund a $1 trillion infrastructure plan will be risky. Corporate bonds could be a good alternative, and might help cushion the current investment slump. But India’s authorities are stifling the market.

Singapore property curbs show Asia’s fear of yen

14 Jan 2013

The city-state is bracing itself for more hot money inflows - this time from Japan. Higher stamp duties and new lending limits are designed to cool Singapore’s soaring real estate market. They may also set the tone for Asian policy makers’ reaction to an abundance of cheap yen.

Shifting trade winds catch Li & Fung off-guard

14 Jan 2013

It used to be that China produced and the U.S. bought. That’s changing, but at an uncertain pace. A profit warning that wiped 16 percent off the value of Hong Kong supply chain company Li & Fung shows that keeping pace is costly, and there’s plenty of room for error.

Japan’s fiscal stimulus is call for action to BOJ

11 Jan 2013

New prime minister Shinzo Abe’s $117 bln spending boost is timely. The money the Bank of Japan will print to mop up the state’s extra borrowing should further weaken the yen. But targeting the exchange rate more directly would be a better option for Japan to end its deflation.

Beware bond-equity rotation and focus on value

11 Jan 2013

Investors have started 2013 feeling bold. Equities are firm, bonds are weak and gold is soft. Is this the long-awaited rotation back to risk? Blindly chasing perceived switches in asset allocation is dangerous. But the value argument is there: shares look cheap relative to bonds.

India’s plan to shield IPO investors has merit

11 Jan 2013

A proposal to allow small shareholders in flopped IPOs to claim a refund smacks of regulatory overkill. But the plan might help restore faith in markets. And unless company owners face consequences for ultra-aggressive pricing, they won’t stop abusing their information advantage.

A how-to guide for Japan to escape deflation

10 Jan 2013

The nation’s new prime minister has promised to end falling prices. But raising the central bank’s inflation target may not suffice. Aiming for a sustained increase in the price level would be more credible. And a de facto currency peg may be better than more money-printing.

For China’s borrowers, bank lending is so passé

10 Jan 2013

Bank loans made up just half the economy’s financing in 2012, while long-term corporate lending contracted sharply in December. It’s now off-balance sheet finance that drives China’s growth. That makes monetary data less useful, and creates new risks when credit goes wrong.

Ping An flop could leave HSBC red-faced but richer

9 Jan 2013

The bank’s $9.4 billion plan to offload its stake in the Chinese insurer is in doubt. If regulators block the sale to a Thai billionaire, HSBC’s reputation will take a knock. Finding other buyers won’t be easy. But the recent market rally means the bank could end up better off.

Rothschild’s Bumi shake-up puts cart before horse

8 Jan 2013

The British financier wants to sack most of the board of Bumi, the stricken coal miner, and its new CEO. His slate of replacements is impressive but his shake-up plan looks half-baked. The first priority should be completing a proposed split with Indonesia’s Bakrie family.

CDB highlights China’s dysfunctional finance

8 Jan 2013

China Development Bank raised $193 billion in 2012 to fuel an unusual mix of vendor financing, M&A lending and infrastructure loans. While it has a legitimate part to play in China’s growth, the policy bank’s habit of undercutting rival lenders smacks of capital misuse.

Japan comes dangerously late to currency war

7 Jan 2013

Trash-talk from the world’s third-largest economy has pushed the yen down some 12 percent since September. But Japan is a Johnny-come-lately to the global contest to weaken currencies to support growth. Opening another front at this point only makes the contest more dangerous.