Asia - Economic Data & News 01 (Jun 08 - Jun 16)

[winston]

In Asia, Hints of a Distant and Fragile Recovery

HONG KONG — The global economy may have stopped its dramatic freefall by now, but data out of the Asia-Pacific region on Wednesday underscored what economists have been cautioning for months: that an actual return to growth is months off, and once here will be feeble.

Orders for machinery in Japan slid 5.4 percent in April from a month earlier, much more than analysts had expected, government data showed Wednesday.

Orders for such factory equipment are a useful barometer of capital investment plans and for the economy as a whole, and the steep decline in April showed just how fragile and protracted a return to growth will be in Japan.

With the economy, the world’s second-largest after the United States, mired in its worst recession in decades and demand for Japanese goods abroad being weak, Japanese companies remain reluctant to invest in equipment.

Similarly, statistics published in the Philippines showed the country’s exports in April were 35.2 percent below a year earlier, and 3.6 percent below March.

The continued weakness in exports – due to slow demand in Europe and the United States – follows similarly disappointing export data for May recently released by South Korea and Taiwan.

By contrast, Australia appears further on the path to recovery, as government stimulus measures and aggressive cuts in interest rates over the past nine months take effect.

Consumer confidence there jumped in June by the most in 22 years after the economy unexpectedly avoided slipping into recession, according to a survey published Wednesday. Similarly, home-loan approvals rose for a seventh consecutive month, helped by government incentives and lower interest rates.

In China, data for May showed consumer prices falling 1.4 percent from a year earlier, reflecting the decline of lower food and energy prices from their unusually high levels last year.

Trade, investment and retail statistics from China, out later this week, will be closely watched. These are expected to show China’s relatively resilient economy is on the path to recovery – though growth there, too, will remain well below the red-hot levels it experienced before the global economic crisis.

Hopes for recovery – even a mild and distant one – have helped stock markets rally since March, interrupted only by muted corrections.

http://www.nytimes.com/2009/06/11/busin ... ref=global

[winston]

From DBS:_

• Asia in V-shape recovery; market may consolidate before the next leg up

DBS Economics team believes that a V-shape recovery is taking place in Asia as exports and industrial production have rebounded. In terms of equity, past stock market recoveries from the bottom of an economic cycle suggest that returns so far are not excessive, and that the rebound has some ways to go in terms of depth and duration.

Short-term consolidation is expected in 3Q before the next leg up. Recovery hopes will need to be supported by more concrete evidence of the turnaround. However, we do not anticipate a deep correction as valuations, although now above historical norms, are not excessive.

History has shown that valuations will always run ahead in a rebound, as investors start to anticipate the
potential for earnings upgrades. We favour industrials at this stage as we move past the early recovery stage.

[winston]

HSBC Says Overseas Buying Won’t Stop Asian Stock ‘Correction’ By Hanny Wan

June 16 (Bloomberg) -- Bigger-than-expected overseas fund inflows will fail to save Asian stocks from a “correction” in the second half of this year because a three-month rally has made shares more expensive, HSBC Global Asset Management said.

The fund management company recorded net inflows of $4.3 billion this year through the end of April, Rudolf Apenbrink, its Asia-Pacific chief executive officer, said in an interview in Hong Kong yesterday. That total was double the amount HSBC Asset expected, he said. The company held $46.6 billion in the region as of April 30.

The MSCI Asia Pacific Index has surged 46 percent from a more than five-year low on March 9 on speculation the global economy is recovering. The rally drove the average valuation of companies in the gauge to 1.5 times the book value of assets at the end of last week. That’s the highest since Sept. 26.

Asian stocks are “not really a bargain anymore,” said Apenbrink. “From a fundamental point of view, later this year we should see a correction. An increase of 50 percent over three months is of course not sustainable. We won’t see that again for the next three months.”

Rising demand for riskier assets and bets on faster economic growth has lured investors to emerging-market equity funds for 14 straight weeks, according to figures from EPFR Global. Asia excluding Japan equity funds attracted a net $1.65 billion for the week ended June 10, of which China equity funds accounted for $404 million, EPFR Global said.

“If markets come down by 10 to 20 percent, for long-term investors, it’s a good chance again to buy emerging market equities because I really believe in the outperformance of emerging market equities for the next five to 10 years,” said Apenbrink. “We will see more flows from Europe and the U.S. to Asia.”

[millionairemind]

Published July 14, 2009

Asian funds see outflow of US$365M

By JOYCE HOOI

ASIAN funds experienced a net outflow for the third week in a row last week, according to the latest weekly fund flow report by Citigroup.

Despite general bullishness about Asian stocks amongst fund managers and analysts, last week saw redemptions of US$365 million from all dedicated Asian funds, bringing total net outflows over the last three weeks to US$596 million.

The three-week outflow streak follows the 15 straight weeks of net inflows in the second quarter of the year, which had amounted to US$13.2 billion.

'Contrasting this with the strength of inflows in the second quarter, outflows this week do not look significant but from a short-term perspective, the downward momentum of Asian fund flows has formed and is likely to carry on before hitting previous lows,' said Citigroup analysts Elaine Chu and Markus Rosgen in their report.

After accounting for 73 per cent of total inflows to Asia two weeks ago, China saw a reversal in fortunes last week. Its iShares FTSE/Xinhua A50 China Tracker Fund racked up US$494 million in outflows - more than the net inflows for six of its neighbouring countries put together.

This situation is likely to exacerbate the regional fund outflow scenario, according to the report.

'With China fund flows driving overall net flows to Asia, any deterioration in China's excess liquidity condition is likely to intensify current outflows,' the Citigroup report said.

Year-to-date, the Straits Times Index (STI) is up 23.88 per cent, most of its gains coming from the bullish rebound that started in March.

After a stellar performance in May, the STI gave back some of its gains, retreating about 1.97 per cent for the month of June.

On the global front, equity markets retreated last month in terms of gains, declining 0.58 per cent in June.

According to The World by Numbers, Standard & Poor's Index Services monthly global stock market review, the decline follows three months of consecutive gains, with the healthcare and information technology sectors gaining but the energy and materials sectors contributing to the decline.

[winston]

Analysts say Asian economies may need more fiscal stimulus packages in 2010 By Tang See Kit,

SINGAPORE : Asian economies may need more fiscal stimulus packages to sustain their growth into 2010, say analysts.

Despite some positive numbers for the second quarter, they note that current projections reflect a slowdown in the fourth quarter of 2009 and into early next year.

They made this comment at a conference organised by financial services provider Macquarie Securities on Friday.

Asian economies are starting to see the effects of government stimulus packages kick in. And there is growing optimism that they may now be on the road to recovery.

But some analysts are warning against popping the champagne too early.

They said that current export levels and private consumptions are not enough to sustain the growth posted in the previous quarter.

And they argue that additional stimulus measures may be needed to keep the region moving ahead.

Dan McCormack, Asia Equity Strategist, Macquarie Securities, said: "We have had a very nice run, proving a restocking cycle globally. I think that is starting to fade now. Increasingly, markets are going to ask where is the final demand. I think the pickup is going to be relatively slow and weak. And as markets slowly realise that final demand is not picking up as aggressively as they priced in, we could just drift a little lower in the next three months or so."

Analysts said they also expect Asia's undervalued currencies to create an increase in demand for property assets in the region, when the recovery begins. And this will result in pressure on property prices and banks.

Bill Belchere, chief economist, Asia, Macquarie Capital Asia, said: "Asset prices in the rest of the world are too high relative to Asia which is too low and that creates an incentive for people to try to buy homes, buy things in Asia and reflate the economy.

"We think that is a process that is incomplete, which is interrupted by subprime in the US. But it is going to restart as the global economy starts to heal. And it is going to bring pressure on property prices, upward pressure on banks."

They said this trend is most likely to take place in countries such as Hong Kong, Taiwan, Singapore and in particular China. - CNA/ms

[winston]

The global value chain

THINK ASIAN By ANDREW SHENG

Asian corporate strategies play a great role in the development of Asia, but their limitations are also the limitations to Asia’s growth. Asia’s great success in its export-led manufacturing strategy was attributed historically to Asia being monsoon economies, where the seasonal nature of rice farming led to Asians being culturally adept at working together in rice fields and in the dry season, skillful at weaving and other handicrafts, so that the agricultural labour force adapted quickly to assembly-line manufacturing.

Of course, forward-looking government policies to open up to foreign manufacturing, the attention to social infrastructure and education helped to equip their economies to copy, learn and then slowly move up the value chain.

http://biz.thestar.com.my/news/story.as ... c=business

[millionairemind]

Published July 27, 2009

Fund managers place their bets on Asian markets
But some wonder if fundamentals can support the surge

By NEIL BEHRMANN
IN LONDON

FOREIGN fund managers are banking heavily on an Asian earnings upturn and continual growth in China to drive market momentum forward.

Following a lull, a sudden leap on Wall Street has boosted foreign investor interest in Asian markets. The psychology of the markets has changed from the fear of losing money to a fear of losing opportunities.

According to EPFR Global fund research, US$137.5 billion flowed out of money market funds and almost a fifth went into Asian and other emerging market funds in the second quarter. The trend has continued in recent weeks, although the size of inflows is subsiding.

MSCI Asia ex-Japan rose by 34 per cent year-to- date to July 24 and emerging Asia by 46 per cent in US dollars, but lower gains in euro and sterling. Credit Suisse said there are several positive fundamental factors which support foreign investment in Asia. First, Asia is expected to lead the global recovery due to its low leverage and financial flexibility to pump-prime economies. Second, China and India are growth engines. Third, emerging Asia is projected to deliver an average earnings recovery of 33 per cent in 2010, according to the Institutional Brokers Estimate System. Finally, company directors are signalling earnings upgrades.



Recovery leaders include companies which benefit from the massive fiscal stimulus packages in China and selected Asian countries, and technology companies with the largest potential earnings rebound. Credit Suisse advises investors to be overweight China, India and Taiwan,

The impressive market surge, however, has made it difficult to find equity bargains. The MSCI Asia ex-Japan index's estimated price-earnings ratio has risen to an estimated 15.5 in 2009 and 12.8 in 2010.

Some sceptics such as Simon Hunt of Simon Hunt Strategic Services caution that a mid-summer rally in equity markets is a common occurrence and is often followed by a sharp fall in the autumn.

'We keep asking ourselves the simple question: how can the biggest global crisis and recession since the 1930s be resolved in a matter of months?' says Mr Hunt. 'The collapse in Asian and global trade was a function of falling final demand and liquidation of bloated inventories.'

The Asian stockmarket boom has been a boon to fund managers who had a dreadful time between 2007 and spring of 2009. Over twelve months, MSCI ex-Japan is still down 26 per cent in US dollars. Thus, the 2009 rebound has only profited investors who entered the market this year and reduced the pain of others.

Jason McCay and Richard Evans who manage the Martin Currie Asia Fund, a hedge fund, are focusing on companies that concentrate on the domestic markets. They increased exposure to Chinese banks and have purchased residential Chinese developer Guangzhou R&F Properties. Bullish on coal, they have bought Bumi Resources in Indonesia and have also invested in the Indian property sector through Unitech.

They are concerned, however that the market surge has been caused by a surplus of liquidity. 'Valuations are no longer cheap and many companies are already pricing in a meaningful recovery in profits.'

Aberdeen Asia Pacific Fund contends that equities 'appear to have run ahead of earnings and economic fundamentals and a pullback would be healthy.' Longer-term, 'Asia's sounder economic fundamentals will enable it to bounce back more strongly than the West'. Top stocks include OCBC, Jardine Strategic Holding, Samsung Electronics, China Mobile and Singapore Telecommunications and Singapore Technologies.

Andrew Beal, fund manager of Henderson Asia Pacific Capital Growth, notes that aggressive government policies, loose monetary conditions and a steady improvement in economic activity have all helped to drive markets higher since March. Taking a long-term view, he says there is growing awareness among Asian governments over-reliance on exports to the West has become a structural weakness. It needs to be addressed by stimulating domestic consumption.

Top positions include China Construction Bank, LG Household & Heath Care, Sino Gold Mining, Taiwan Semiconductor, CSL, Sino Land and New World Development.

[millionairemind]

uly 29, 2009
Hot money floods Asia
Vast sums flow into region in search of growth
By Goh Eng Yeow, Senior Correspondent

THE current spectacular surge in Asian stock markets is being driven by vast sums of hot money flowing into the region in search of growth, analysts say.

Another key factor that has unleashed this deluge of liquidity is China's recent loosening of restrictions on the outflow of funds for direct foreign investments.

The result of this heady mix: Investors are partying like it is the rampaging bull market of late 2007. Back then, regional stock markets sped to record highs, following a proposal by China to allow a so-called 'through train' scheme to allow its mainland citizens to buy stocks directly in Hong Kong.

Analysts see distinct parallels between then and now - including the risk of a rapid asset bubble. The expected beneficiaries of the latest flood of liquidity would include blue chips which mainland investors have no access to, and giant mainland firms listed in Hong Kong.

This would explain sharp gains on Tuesday posted by DBS Group Holdings, up 72 cents to $13.72, and United Overseas Bank, up 54 cents to $17.38, as well as a 12 cent rise to $4.06 by property giant CapitaLand which has extensive China exposure.

In a report last week, Morgan Stanley said the surge in regional stocks was similar to a sharp rebound sparked by the 'through train' scheme - after the August stock market crash two years ago.

The scheme failed to materialise owing to concerns over its possible impact on mainland bourses, but it still triggered massive buying of blue-chips in Hong Kong and other regional markets.

In recent months, flows of hot money into China have accelerated. As a result, China's foreign reserves surged to a record high of US$2.13trillion (S$3trillion) in June, even though it had only enjoyed a smallish second quarter trade surplus of US$34.8 billion.

Apart from hot money, massive lending by mainland banks is creating abundant liquidity, causing the Shanghai stock market to surge by 88.8per cent this year.

In the first half of this year, mainland banks rushed to extend 7.37 trillion yuan (S$1.5 trillion) in fresh loans. It sparked fears that fresh asset bubbles in China might be forming, as the money was diverted to stocks and property. To cope with such a surge of liquidity, Morgan Stanley said China may 'simply be allowing more hot money outflow indirectly into the Hong Kong stock market'.

[millionairemind]

Nice article in this week's Economist

Emerging Asian economies
On the rebound

Aug 13th 2009 | HONG KONG
From The Economist print edition
Asia’s emerging economies are recovering much more quickly than economies in other parts of the world. Can they keep it up?
http://www.economist.com/displaystory.c ... d=14209825

[millionairemind]

August 18, 2009, 10.52 am (Singapore time)

Global experts warn of Asian water, food crisis

STOCKHOLM - Scientists have warned that Asia must urgently reform its water management to avert devastating food shortages as populations increase.

Water experts said Monday that demand for food on the continent will double by 2050 and force countries to import more than a quarter of their grain, unless they start supplying water to farms more efficiently.

'If we don't manage to do that there will be increases in malnutrition, increases in poverty, increases in social unrest,' said Colin Chartres, director general of the International Water Management Institute.

Mr Chartres cautioned that the problem will spill into Asian neighbours, based on the experiences of the food crisis of 2007-2008.

'I expect we will see more of these kind of crises as we move forward and it will be increasingly hard for the exporting countries to provide enough food,' he told The Associated Press as his institute jointly published a report on water management with the United Nations.

The report was published at the start of the Stockholm World Water Week, attended by more than 2,500 scientists, politicians and other officials worldwide.

The report said South Asia could satisfy all of its additional demand for food by improving performance of crop irrigation, while Asia as a whole could meet three quarters of the extra demand.

Improving crop irrigation in Asia is particularly important because most of the land is already used for agriculture, Mr Chartres said.

'You can't expand the area. You have to intensify what is already there, and irrigation offers a greater potential to intensify production,' he said.

The report proposes modernising old Asian irrigation systems built in the 1970S and 1980S, and expanding the use of rainwater in farming. It also says private companies and governments should support local initiatives among farmers.

Mr Chartres said the proposed reforms require billions of dollars of investment in Asian water infrastructure during the next 30 to 40 years.

'We are putting this report out as a wakeup call,' Mr Chartres said. 'I'm actually optimistic that this is an area we can tackle ... but we have to start now. ' -- AP