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IMF Country report-People's Republic of China-Hong Kong Special Administrative Region: Financial System Stability Assessment
May 22, 2014--Summary: EXECUTIVE SUMMARY Hong Kong SAR's (HKSAR) financial sector is one of the largest and most developed in the world, ranking number one in the World Economic Forum Financial Development Index. The banking system, with assets of US$2 trillion and equivalent to 705 percent of GDP, is highly capitalized, profitable, and liquid. The securities markets are deep, liquid, and efficient, with total stock market capitalization of 1,000 percent of GDP.
The insurance sector has high penetration (now ranked the second in Asia after Japan), and is well capitalized. The sector is very well regulated, with the capacity to withstand a diversity of shocks. While the financial sector faced significant stress during the early stages of the 2008 global financial crisis, market confidence recovered quickly, aided by the decisive measures adopted by the Hong Kong authorities to mitigate its impact.
The sector, however, faces major risks, which puts a significant premium on effective liquidity management, macroprudential oversight and microprudential supervision. The anticipated exit from unconventional monetary policy in the United States could increase capital market volatility and reduce system-wide liquidity. A correction of property prices, which now stand at historical highs, poses risks for both borrowers and banks. The increasing economic and financial integration between HKSAR and Mainland China offers considerable expansion opportunities, but, at the same time, generates significant spillover risks, especially if a significant financial disruption or economic slowdown were experienced. Stress tests suggest that banks are well positioned to absorb a significant realization of risks. Banks' aggregate capitalization would remain well above the Basel III's minimum capital requirement, and the banking sector (including foreign branches) has sufficient liquidity to withstand large deposit and wholesale funding withdrawals. At the same time, the tests highlight that a few smaller banks might be slightly more vulnerable under a severe economic scenario, and, reflecting the nature of their businesses, foreign branches are relatively more sensitive to withdrawals of wholesale funding. This underscores the need for continued vigilance in these areas. The authorities have actively deployed macroprudential policies to mitigate systemic risks. In particular, in the face of a doubling of house prices, the Hong Kong Monetary Authority (HKMA) introduced tighter limits on loan-to-value (LTV) and debt-servicing (DSR) ratios. Going forward, it will be important that the authorities strengthen their capacity for systemic risk analysis at both the Securities and Futures Commission (SFC) and Insurance Authority (IA) to complement the analysis undertaken by the HKMA. This would help ensure that cross-sectoral interconnections are adequately captured when considering systemic risks.
People's Republic of China-Hong Kong Special Administrative Region: 2014 Article IV Consultation-Staff Report
Press Release; and Statement by the Executive Director for the People's Republic of China-Hong Kong Special Administrative Region
May 22, 2014--Summary: KEY ISSUES Outlook and risks. The macroeconomic outlook is favorable. Growth has firmed, inflation has eased, and unemployment has remained low-trends that are expected to continue. The main risks relate to the impact of the Fed's tapering, the outlook for the Mainland, and a possible correction in property prices. Financial.
The Financial Sector Assessment Program (FSAP) conducted in 2013-14 concluded that the financial system is well regulated and supervised and the banking system is resilient to shocks.
The main areas for improvement are the financial sector resolution regime and insurance sector regulation and supervision. The large and growing exposure to the Mainland warrants continued close monitoring. Property. After a prolonged rise, property prices have stabilized. Counter-cyclical prudential and fiscal measures deployed during the upswing provide buffers that can be used to faciliate an orderly adjustment in the market while safeguarding financial stability. A long-run solution to housing hinges on ensuring adequate supply. Fiscal policy. Hong Kong SAR has a track record of fiscal discipline. Casting fiscal policy in a long-term framework will help strike a balance between spending to address aging and inequality, preserving low taxes, and maintaining fiscal prudence. External assessment. Hong Kong SAR's external position is consistent with medium-term fundamentals and desirable policies. The Linked Exchange Rate System remains the best arrangement for Hong Kong SAR.
Bourse explains rules for exchange-traded funds
May 21, 2014--Foreign investors will be able to own up to 100 per cent of exchange-traded funds, participants heard at a seminar held by the HCM Stock Exchange (HOSE) on Tuesday.
For listing, an exchange-traded fund (ETF) should have a minimum chartered capital of VND50 billion (US$2.4 million), at least two authorised participants with one or both of them being a broker or dealer (at HOSE), according to proposed regulations.
China says faster economic reforms needed
May 18, 2014--China will try to quicken the pace of economic reform this year as part of the government's efforts to arrest a slowdown in the world's second-largest economy, the country's top economic planning agency said late on Saturday.
The National Development and Reform Commission (NDRC) reaffirmed nine reform priorities for 2014, including deepening reforms in the power and the oil and gas industries and cutting red tape for investment approvals, according to a statement on its website, www.ndrc.gov.cn
China data paints downbeat picture
May 13, 2014--China's economic activity showed across-the-board weakness in April, with data from output to investment and consumption all missing market expectations, sparking new calls for Beijing to ease policies to shore up growth.
Months of lacklustre performance and growing signs of weakness in the housing market have led some analysts and investors to question whether more stimulus is needed lest economic expansion this year fall short of the official target of around 7.5%.
First leveraged ETF to list in Taiwan in second half
May 12, 2014--A number of innovative ETF products including leveraged, gold, and energy futures funds are expected to come online in Taiwan as early as the second half of this year, according to a report from United Daily News.
Sush-Der Lee, chairman of the Taiwan Stock Exchange (TWSE), told local media that the emergence of these products would significantly boost local ETF market liquidity.
Asia-Pacific ETF AUM could reach USD250 billion by 2016, says BNY Mellon
May 12, 2014--With 'mutual recognition' of investment products between Hong Kong and the China set to transform these markets, regulators and market participants need to consider the conditions that will allow the benefits of this impending policy to take full effect for the region's growing exchange traded funds (ETFs) market, notes Rex Wong, managing director within BNY Mellon's Asia Asset Servicing business.
"There's great potential for mutual recognition to make life easier for ETF promoters and drive product design and development as they expand their footprint in the Asia-Pacific region. But success in building the ETF market in China and sustaining product development also requires changes in local market infrastructure and, most importantly, regulatory reforms," he says.
DB-Synthetic Equity & Index Strategy-Asia-Pac Monthly ETF Market Review-Mixed flow trend across the region
May 12, 2014--Data in this report is as of 30 April 2014
Global Summary
As of the end of April 2014, global ETP assets approached $2.36 trillion (+4.1%
YTD) with Asia-Pacific ETPs assets holding above $170bn. Overall strong
inflows received by the global ETP industry tripling previous month’s inflows to +$33bn in April. US domiciled ETPs experienced the largest inflows (+$19.5bn) followed by ETPs in Europe (+$8.8bn) and Asia-Pac ETPs (+$4.7bn). Globally, equities lead the tally with the inflows of +$26.6bn.
Monthly Trends-Asia Pacific
Market Review
Last month, Asia-Pacific region had mixed markets. Compared to the month
before, from north to south:
Japan (Nikkei 225) -3.53%
Korea (KOSPI2) -1.08%
China (CSI 300) +0.58%
Hong Kong (HSI) -0.08%
Singapore (FSSTI) +2.39%
Australia (S&P/ASX 200) +1.75%
ETP flows: Japan and China ETFs witness traction
Asia-Pacific ETPs market reversed the previous month’s trend with strong
monthly inflows of +$4.7bn (-$1.5bn in March), setting YTD cash flows at
+$10.8bn. This was primarily contributed by Equity ETFs with +$4.6bn in new
money.
Within equity, developed market benchmarked ETFs led the tally receiving inflows of +$4.4bn, mainly driven by one Japan focused ETF (Daiwa ETF – Topix - 1305 JP) with +$3.7bn worth of new creations. Emerging market (EM) ETFs closed the month with little but positive flows in contrast to the -$1.7bn of outflows in March. Most activities were seen among China and Taiwan focused ETFs recording +$547mn of inflows and -$363mn of outflows respectively over the last month. On a sub-segment level, theme based and financial sector ETFs registered notable inflows of over +$500mn and +$400mn respectively, while leveraged long strategy ETFs saw outflows of close to -$1bn.
Winners and losers: At ETP level, largest inflows were received by Daiwa ETF-Topix (1305 JP), GS CPSE BeES (CPSEBE IN) and CSOP FTSE China A50 ETF (82822 HK) collecting +$3.7bn, +$556mn and +$461mn respectively. Largest redemptions were experienced by Samsung KODEX Leverage ETF (122630 KS), Taiwan Top50 Tracker Fund (0050 TT) and Tracker Fund of Hong Kong (2800 HK) with outflows of -$959mn, -$361mn and -$277mn respectively
BetaShares launches new ETF
May 9, 2014--Exchange Trade Fund (ETF) specialist BetaShares has launched a new investment fund on the Australian Securities Exchange (ASX).
It said the BetaShares Geared Australian Equity Fund (hedge fund) would trade under the ASX Code "GEAR" and provide investors with a simple way to obtain a cost-effective geared exposure to the returns of the Australian share market.
STOXX Introduces Chinese Version Of STOXX Name
May 8, 2014--STOXX Limited, the market-moving provider of innovative, tradable and global index concepts, today unveiled the Chinese version of its name at an official ceremony in Shanghai-"STOXX 势 拓". It will be used across Greater China to represent STOXX's brand and innovative index concepts.
The Chinese name of STOXX is represented by the characters "Shi Tuo" (势 拓). Shi symbolizes force, power, momentum and Tuo embodies the spirit of an explorer, pioneer,innovator. These attributes embody the spirit of STOXX and the company's mission.
