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

[mocca_com]

Asian Development Bank to set up US$3b fiscal spending fund
Posted: 02 May 2009 1230 hrs

NUSA DUA, Indonesia: The Asian Development Bank (ADB) said on Saturday it will establish a three-billion-dollar fund to boost developing member countries' fiscal spending capacity amid the global economic crisis.

ADB President Haruhiko Kuroda announced plans for the new facility at the bank's annual meeting on the Indonesian island of Bali, saying it would provide short-term loans faster and cheaper than existing programmes.

"I believe this will be a very welcome initiative to assist faltering economies and, most importantly, protect the poor from the worst impacts of the crisis," Kuroda said.

The Countercyclical Support Facility is subject to approval by the lender's board of governors, who will meet here on Monday and Tuesday to discuss the impact of the global downturn on Asia's developing economies.

The announcement comes just two days after the board agreed to triple the ADB's capital base, from 55 billion dollars to 165 billion, allowing the bank to boost lending support amid the crisis.

In a report released at the press conference, the bank revealed plans to increase its lending assistance by more than 10 billion dollars in 2009-2010.

That would bring total ADB assistance during the period to about 32 billion dollars, compared with about 22 billion dollars in 2007-2008, it said.

"The crisis support will include project investments, quick-disbursing policy-based loans, guarantees, and new initiatives designed to address specific crisis needs," the bank said in a statement.

"ADB will also expand its support through grants for policy analysis and capacity building."

The bank has said GDP growth in developing Asian countries is projected to decline to just 3.4 per cent this year from 9.5 per cent in 2007.

At the lower rate, more than 60 million people in the region will remain in extreme poverty than if the higher rate had been maintained.


- AFP/so

[kennynah]

i sure hope that meagre USD3billion can make a positive dent

[mocca_com]

ASEAN, China, Japan, SKorea finalise crisis fund pact

NUSA DUA, Indonesia: Ten Asian countries plus China, Japan and South Korea agreed Sunday to set up a 120-billion-dollar emergency currency pool to boost liquidity and help the region overcome the global crisis.

Finance ministers of the 10-member Association of Southeast Asian Nations (ASEAN) plus China, Japan and South Korea announced the deal after talks alongside the Asian Development Bank (ADB) annual meeting in Indonesia.

"We are pleased to announce that we have reached agreement on all the main components of the CMIM (Chiang Mai Initiative) and decided to implement the scheme before the end of the year," the ministers said in a joint statement.

Japan and China will contribute 38.4 billion dollars each, with China's share including 4.2 billion dollars from Hong Kong. South Korea was the next largest with 19.2 billion dollars.

Among the ASEAN countries the biggest contributors were Indonesia, Singapore, Thailand and Malaysia, which agreed to provide 4.77 billion dollars each.

The ministers were careful to explain the scheme was intended to "supplement" existing international financial institutions amid concerns from some quarters that it is a bid to circumvent the International Monetary Fund (IMF).

ASEAN member states were forced to implement unpopular economic reforms in exchange for massive IMF bailouts after the 1997-1998 Asian crash, leading to calls for the creation of a regional crisis fund.

But the finance ministers played down any suggestion they were snubbing the IMF and its sister lender, the World Bank, saying the move was only a "natural" step on the path of closer regional economic cooperation.

ADB managing director general Rajat Nag said the scheme was "very much complimentary" to the IMF. He said the Bretton Woods institution was in no danger of losing its place as the global economic watchdog.

"We certainly see this as a very welcome step to help in the current financial crisis," he told reporters at the ADB meeting at the luxury beach resort of Nusa Dua, Bali.

"I should make the point that the ASEAN plus Three finance ministers do not see this in any way being a substitute for the IMF," he added.

The move comes amid China's rise as a global economic power and as the world economy suffers its worst slump since the 1930s Great Depression thanks to a banking crisis triggered by bad mortgages in the United States.

Chinese Vice-Finance Minister Li Yong, who is attending the talks here, last month condemned the dollar-dominated international monetary system as "a major defect in the current international economic governance structure."

The Asian ministers said the currency swap initiative met the region's two "core objectives" -- to address short-term liquidity difficulties and "supplement existing international financial arrangements."

"The total size of the CMIM is 120 billion dollars, with the contribution proportion between ASEAN and the plus-three countries at 20:80," the statement said. The plus-three countries are China, Japan and South Korea.

In addition to the Chiang Mai fund, Japanese Finance and Economy Minister Kaoru Yosano said Tokyo was considering a scheme to offer yen swaps worth up to six trillion yen (60.4 billion dollars) to be tapped in emergencies.

Such swap agreements can be tapped to ease liquidity trouble as they boost the amount of foreign currency regional banks can access while helping companies that use foreign currencies when trading.

ADB president Haruhiko Kuroda said Asia's main export markets had experienced a "massive contraction in demand" due to the downturn in the world economy and the region had to end its heavy reliance on export sales.

He said any recovery in Asia would likely be driven by domestic demand.

"Over the longer term, developing Asia is starting the process of rebalancing growth from excessive dependence on external demand to greater resilience on both consumption and investment," he said.

"Already there are signs that domestic consumption is remaining strong in Asia and may well lead the way out of this downturn."

The ADB is predicting growth of 3.4 per cent for the region this year, compared with more than nine percent in 2007.
- AFP/yt

[winston]

Asian Stock Rally on ‘Final Leg,’ May Fall: Technical Analysis By Chen Shiyin

May 4 (Bloomberg) -- Asian stocks are on the “final leg” of a rally from their March lows and face a “correction” by the middle of the month, Elliott Wave International Inc. said.

India is among markets that may give up some gains, with momentum and volumes slowing during the recent rally, Elliott Wave International said in its May Asian-Pacific Financial Forecast report. The decline is a correction within a longer stretch of advances, and prices are set to exceed their recent highs after the temporary drop, the researcher wrote.

The MSCI Asia-Pacific Index climbed 12 percent in April, the biggest monthly gain in more than a decade. That helped erase losses this year, though the measure’s still 47 percent lower than its 2007 peak.

“Corrections are due in most Asian-Pacific indexes by mid- May, and they should last through the end of the month and possibly into June,” Elliott Wave International said in this month’s report, which was released on May 1. “Thereafter, the multi-month rally should resume.”

Elliott Wave Theory, created by U.S. market analyst Ralph Elliott in 1938, attempts to predict future price moves by dividing past trends into sections, or waves, and calculating changes in value.

The principle states that fifth waves display “a slower maximum speed of price change” and that volumes in the fifth wave tends to be less than in the third, Elliott Wave International said.

Benchmark indexes in South Korea and China are among others that may decline as volumes and the rate of change slows, according to the report.

Elliott Wave International said in last month’s report that Asian stocks may gain at least 15 percent during a “multi- month” rally, citing chart formations that predicted this year’s rebound for Chinese shares.

The patterns formed by the rally in India’s Bombay Stock Exchange Sensitive Index between 2003 and 2008 also indicate that prices are poised for a “pullback,” Elliott Wave International said. The decline will be “a small second-wave correction within a much larger advance,” the researcher said.

[winston]

TAKE-A-LOOK-Foreign funds flow back to Asia on China hopes

After a six-month drought, foreign investors have been sending billions of dollars back to Asia, a trend some expect to continue on hopes China will lead the region out of the global recession.

Foreigners have poured a net $6 billion into six major Asian markets since early March, according to BNP Paribas, helping to boost China, Taiwan and South Korean stocks by up to 35 percent this year and making them the world's best performers.

MAIN STORY > China hopes draw billions in foreign funds back to Asia
INDIVIDUAL MARKETS > Taiwan inflows surge on warming China ties
India poll worries to moderate brisk foreign flows
Grim outlook leaves Japan behind in Asia fund inflow
Firmer won, earnings draw funds back to S.Korea
S.Korea won sees best day in 6 mths on econ view
Foreign investors sold Japan stocks last week

Source: Reuters

[millionairemind]

IMF REGIONAL OUTLOOK
'Long, severe recession'

Export-driven Asian economies are exposed to the risk of a structural decline in demand from advanced economies, the IMF said. -- PHOTO: ASSOCIATED PRESS
SINGAPORE - THE International Monetary Fund (IMF) on Wednesday sharply slashed its growth outlook for Asia, predicting a 'long and severe recession' for the region's wealthier but export-reliant economies.

The US-based institution said it now expected growth in Asia, including Japan, would slow to 1.3 per cent this year after an initial forecast, made in the last quarter of 2008, of 2.7 per cent growth.

FISCAL MEASURES
MANY Asian economies entered the crisis with significant room for fiscal support to their economies, but it was important to ensure that the fiscal stimulus injected this year is not withdrawn prematurely, the IMF said.

'Only a few Asian countries have so far announced packages for 2010, creating the public perception that stimulus might be withdrawn at a time when economies are likely to remain very weak,' the Fund said.
... more
'The spillovers from the global crisis have impacted Asia with unexpected speed and force,' the IMF said in its regional economic outlook.

'Prospects for an imminent rebound of economic activity are weak,' it said, underlining that the region is still heavily dependent on exports at a time when demand has weakened because of the global downturn.

It said it now expected 4.3 per cent growth in 2010, down from an initial forecast of 4.5 per cent.

For emerging nations in Asia, which excludes Japan, the IMF lowered its growth forecast to 3.3 per cent from 4.4 per cent. It put 2010 growth at 5.4 per cent, down from an initial 6.0 per cent.

The region's wealthier economies 'are expected to experience a long and severe recession' because of their heavy reliance on high-tech exports and extensive exposure to the global financial system, the IMF said.

It urged Asia to 'rebalance' its growth model and focus more on spurring domestic demand.

The export-led model of economic growth 'may not pay the same dividends as in the past' as households in advanced economies were now expected to be more careful about expenses in the face of the worldwide slowdown.

'The current crisis vividly illustrates that, far from having 'decoupled' from the global economy, Asia has experienced accelerator effects at work,' the IMF said.

'Despite governments' efforts to invigorate domestic demand, the prospects of a recovery at this stage hinge critically on a rebound in global activity.' Asia's largest economy, Japan, is projected to shrink 6.2 per cent this year, far worse than last year's contraction of 0.6 per cent.

The Japanese economy is expected to return to growth in 2010 with an expansion of 0.5 per cent, the IMF said.

It meanwhile said growth in China was expected to be 6.5 per cent this year and 7.5 per cent in 2010, and forecast 4.5 per cent growth in India for 2009 and 5.6 per cent the following year.

Within Southeast Asia, the IMF report said that Malaysia, the Philippines and Thailand would be affected more severely than other nations by the global slowdown due to their heavier reliance on high-tech exports. -- AFP

[winston]

Aberdeen Asia fund veteran wary of stocks rally

* Says hard to find value among Asian stocks
* Favours Singapore's OCBC, UOB, HK's Swire Pacific
* Says trading, timing markets don't work in long-term

By Kevin Lim SINGAPORE, May 7 (Reuters) - Fund manager Hugh Young entered the financial industry in the 1980s knowing next to nothing about stocks.

More than two decades later, and with $38 billion in assets under his wing, the managing director of UK money manager Aberdeen Asset Management's Asia business still insists he is "not clever enough", and therefore does not invest in anything he doesn't understand.

That stance is making Young, 50, cautious about the recent surge in Asian stocks, especially China's.

"The rally goes against the prevailing economic climate," he said, warning it won't be sustainable as the global economy is still in the doldrums.

Only one China stock -- China Mobile <0941.HK> -- has found a place among his top holdings, even as international investors pour money into the world's third-largest economy. [ID:nTP205394] Young, a Briton, graduated in politics and landed a job as a broker only upon the recommendation of a friend. He has been investing in Asian equities since the mid-1980s after first getting a taste of the region by backpacking through India, Bangladesh and Nepal.

He set up the Asian arm of Aberdeen Asset in 1992 with less than $500 million in assets and is now based in Singapore.

A practitioner of what he calls a "Warren Buffett-like" investment strategy, Young hunts for well-managed companies at reasonable prices for long-term gain.

Aberdeen's one major addition to its portfolio in recent months was Hong Kong Exchanges and Clearing <0388.HK>, which it bought "when everything looked battered and bruised", said Young, who collects Asian art and artefacts as a hobby.

The fund manager doesn't chase rallies or hold large amounts of cash to time the market, which he says is difficult to do. His advice to junior colleagues is to "keep it simple".

"I haven't come across many trading portfolios that have survived very long," said Young, whose top holdings include Singapore's Oversea-Chinese Banking Corp and United Overseas Bank , and Hong Kong conglomerate Swire Pacific <0019.HK>.

"If you can time things correctly and buy on the good days and sell on the bad days, that's fine. In our experience, there are not many people who get it right everytime."

STICKING TO KNITTINGS

Aberdeen's conservative style has helped it outperform the market during a difficult 12 years when Asia experienced the 1997/98 financial crisis, the dotcom crash of 2001, the SARS outbreak in 2003 as well as the meltdown in regional markets after Lehman Brothers' collapse in September 2008

[winston]

Asia’s ‘Absolute Greed’ Stocks Rally to Falter, Citigroup Says By Chua Kong Ho

May 8 (Bloomberg) -- Asian stocks are set for a “correction” as a two-month rally drives valuations higher than justified by a recovery in company earnings, according to Citigroup Inc.

The MSCI Asia Pacific Index has gained 37 percent from a five-year low on March 9. The rebound has lifted the average valuation for stocks on the Asian gauge to 23.6 times profit, the highest since March 2004 and 52 percent more than shares on the MSCI AC World Index, according to data compiled by Bloomberg.

Markets are poised for a decline as valuations are higher than they should be at this point in the economic cycle, Citigroup’s Adrian Faure said. He doesn’t expect stocks to fall below their March lows, he added.

“The speed with which absolute fear has been replaced by absolute greed has been extraordinary,” said Faure, the Hong Kong-based head of Asia Pacific research at Citigroup, in a telephone interview. “I’ve not seen such a turn of events and I’ve been doing this a long time. We’ll see a correction as markets aren’t going to go up in a straight line.”

Citigroup was top-ranked in Institutional Investor magazine’s 2009 investor survey for research on Asian equities outside Japan, which was released this week. The survey, in its 16th year, surveyed more than 1,900 buy-side analysts and fund managers at 700 institutions managing an estimated $1.6 trillion in non-Japanese Asian equities.

‘On a Tear’

Stocks have been “on a tear as an awful lot of money hasn’t participated in the bounce and is being forced to chase the market,” he said. There’s still a “hangover of excesses built up over many years,” he added.

Faure, 44, was head of Asian equities research at Macquarie Securities Ltd. and the co-head of global emerging markets research at Merrill Lynch & Co., now part of Bank of America Corp., before joining Citigroup four years ago.

Faure’s views were shared by Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd., who said he “wouldn’t be a buyer” of stocks trading in the city.

Hong Kong’s Hang Seng Index has surged 52 percent from a four-month low on March 9, pushing the average valuation of its 42 companies to 15.5 times reported earnings, the highest level since Jan. 10, 2008.

“Stock markets tend to run ahead of economic activity,” said Arculli, who has been chairman of Asia’s third-largest bourse for two years. “There’s a lot of that with the index being at the current level.”

‘Vastly Worse’

The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said yesterday, adding “this is the most difficult period of humanity that we’re going through.”

While every market looks “overbought,” Taiwan and South Korea still present the best investment opportunities in the region, Citigroup’s Faure said.

Taiwan’s Taiex Index has advanced 43 percent this year for the region’s biggest gain, on optimism that improving ties with China will lead to an inflow of foreign direct investments, and funds into the island’s stock market.

China Mobile Ltd. agreed last month to buy a 12 percent stake in Taiwan’s third-biggest phone company Far EasTone Telecommunications Co., while Taiwan’s Financial Supervisory Commission announced it will begin accepting applications from Chinese institutional investors to buy securities on the island.

“The China Mobile deal was a political deal,” Faure said. “What it tells you is that the trend of financial and economic integration with China is now irreversible. Taiwan is coming in from the cold.”

[millionairemind]

Asian stocks soar - but it's a false start

May 08, 2009

Bullish sentiment is "sloshing over" Asia, says Brett Williams of BNP Paribas. Early this week the MSCI Asia ex-Japan index jumped to a seven-month high after gaining about 35% since global markets hit their lows in March. A recovery in global risk appetites has helped. Meanwhile, the news that last month China's PMI gauge of manufacturing registered its second successive reading above 50 – indicating expanding activity – has provided further evidence of economic stabilisation in the Middle Kingdom.

In Taiwan, the main index gained 12% in two days on hopes that China's first investment since 1949 – a stake in a local telecoms group – will eventually herald a wave of such deals. Investors were also cheered by news this week that 13 countries have agreed to set up a $120bn emergency fund to offer emergency balance of payments support to countries hit by capital flight, a hallmark of the 1998 Asian crisis. "A step in the right direction for Asia to wean itself off dependence on the West," says Williams.

Investors have also taken note of Asia's encouraging long-term outlook. The region's banks largely avoided toxic debt. Unlike many Western countries, Asia has also been "able to afford stimulus without going into significant debt", says Al Clark of Schroders. Not only is government debt low, but household borrowings as a proportion of GDP range from 3%-70%. That compares well to over 100% in Anglo-Saxon countries, so it should be possible for the region gradually to bolster consumption and rely less on exports.

Nonetheless, it's far too soon to talk of Asia "springing back to life", says Capital Economics. A gauge of Thai manufacturing production, for instance, beat estimates by dropping 15% in March – a better result than February's 20% slide. Meanwhile, Korean exports fell by 19% year-on-year in April; "still awful", but at least "things have stopped getting worse; they were down 25% across the first quarter". Korean GDP edged back into the black between January and March, gaining 0.1% (after shrinking by 5% in the previous three months), thanks to government spending and lower interest rates.

But high unemployment will put the brakes on a rebound in consumption. Also, says Citigroup, for most of Asia manufacturing output is only stabilising or bouncing around at 16%-33% below seasonally adjusted output peaks. Better-than-expected data aren't the same as "out of the woods". Only in China can we legitimately talk of "green shoots", and China can't "carry the region".

Korea's finance minister noted this week that "a full-fledged recovery" in Korea depends on "a full recovery in the global economy", and that goes for Asia as a whole. The western financial system is far from fixed, while debt-soaked American consumers are gradually rebuilding their savings, which does not bode well for Asian exports. As far as emerging markets are concerned, "everything still depends on the US consumer", says Merrill Lynch's Michael Hartnett.

Nor does it help investors that forecasts for Asia suggest a 34% peak-to-trough decline in earnings. Profits usually drop by more like 50% during recessions – and this is a nasty one, notes Citigroup. As for valuations, the price-to-book ratio hit 0.9 at the nadir of the last two major recessions. It is currently still a toppy 1.5 and has only been as low as 1.1 in this cycle. Put all this together and investors in Asia seem to be jumping the gun. The conclusion has to be that this is "a bear rally vulnerable to an eventual sell-off".

[millionairemind]

[b]Foreign fund flow to Asia peters out

Goh Eng Yeow
The Straits Times
Publication Date: 29-05-2009

The march of foreign money into Asian markets has slowed dramatically over the past week with experts signalling that investors are feeling a touch of 'rally fatigue' after a hectic few months.
The numbers are startling: just US$900,000 trickled in last week, compared with the $1.9 billion which poured in a fortnight ago.

And foreign cash flowing into funds buying China shares - the region's most favoured destination - dropped by almost half to $273.3 million last week from a weekly average of $501.4 million in the previous four weeks.

In Hong Kong, foreign funds investing in equities there have started to move out. A net $3.3 million flowed out last week after $59.4 million had been pumped in two weeks earlier.

Foreign investors have stayed muted over Singapore. They poured only about $8 million into funds investing in local equities last week. The bulk of trading on the bourse here is still driven by retail investors.[/b]

While no trader is calling it a day on the two-month-old market rally just yet, the latest data from Citigroup Investment Research raises concerns that investors are experiencing fatigue after a run-up that has seen some regional markets surge by over 50 per cent.

Some analysts are also worried that the sharp rise in valuations in emerging Asian markets might not be supported by a similar recovery in corporate earnings as their main export markets in the United States and Europe remain mired in recession.

"If there is over-exuberance anywhere, it is in emerging markets, where a net 46 per cent of fund managers are overweight, up from 26 per cent in April," said Merrill Lynch in its latest survey of fund managers last week.

There is also a fear that fund managers will repeat the strategy of previous years and take profit on their portfolios.

"Asian funds saw net redemptions 63 per cent of the time in June over the past eight years," noted Citigroup analyst Elaine Chu. Last June, for instance, foreign funds took $4.8 billion out of the region.

The risk of foreign funds again selling out of Asian equities remains, she said. Some funds would have made huge profits after pouring hefty sums into regional markets since March, when bourses were at their lowest levels for the year.

But the balmy picture that lured foreigners to pour money into regional markets has turned a tad cloudier.

In February, the smart money was starting to nibble at regional equities, convinced that China's mammoth four trillion yuan stimulus package would boost the rest of Asia by stirring up domestic consumer demand.

But doubts have begun to beset the China growth story of late. There are reports that much of the stimulus cash has been pumped into infrastructure projects and buying factory equipment to expand capacity for goods for which there is no longer any demand in the US and Europe.

Investors are also unsettled by the concerns over the quality of the $757 billion worth of new loans made by mainland banks between January and April.

"Ordinarily, falling corporate profits are met with tightened lending but in China, precisely the reverse is happening," said Fitch Ratings in a recent report.

It noted that mainland banks are increasing their exposure to the corporate sector, just as earnings are falling.

Fitch also warned that there are early warning signs that China banks' asset quality might be deteriorating, raising the spectre of its own sub-prime crisis.

More loans are being labelled as 'special mention loans'. This is one step before they are downgraded to bad or non-performing loans.