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IMF-Republic of Korea: 2013 Article IV Consultation-Staff Report; Press Release and Statement by the Executive Director for the Republic of Korea
April 17, 2014--Summary: KEY ISSUES Overview. Korea has experienced impressive growth since the 1970s, enabling it to escape the middle-income trap. However, this prosperity has been concentrated lately within the highly competitive export-oriented conglomerates, whereas household income growth and service sector productivity have been sluggish. Moreover the population is aging rapidly. To sustain income convergence with the most advanced countries and enhance stability and inclusiveness, Korea needs ambitious reforms to its fiscal framework (including to create space for higher social spending), labor market, and services sector. Such reforms would be mutually reinforcing. Near-term Outlook and Risks.
The economy is recovering gradually, helped by supportive monetary and fiscal policies and strong exports, and it emerged as a "safer" haven in last summer's market turmoil. Growth should strengthen further in 2014, although risks are on the downside. The main near-term risks are external: sharply slower growth in Korea's main trading partners or severe market stress. Given significant private debt overhang, key domestic risks are weak domestic demand and, over time, lower potential growth if structural reforms fail to offset the drag from rapid aging. Policy Recommendations. Policies should aim to tackle the weakness of domestic demand and counter forthcoming headwinds to potential growth.
Fiscal Policy. Keep supporting demand in 2014, which may require a supplementary budget. Increase countercyclicality through higher automatic stabilizers and a structural balance fiscal rule. Create fiscal space to boost household incomes and the growth potential by allowing a temporary structural decline in government savings and broadening the narrow tax base.
Structural Policies. Continue to focus on labor market reforms to enhance participation and reduce duality and, as the social safety net expands, accelerate services sector deregulation and SME consolidation.
Monetary Policy. The current accommodative stance is appropriate given the lack of inflation or financial stability concerns. Normalization should not start until there is confidence that the output gap will close soon.
Exchange Rate Policy. The exchange rate should continue to be market-determined and intervention limited to smoothing disorderly market conditions. FX reserves are ample and there is no need for further accumulation.
Financial Sector. As the FSAP found no imminent stability risks, focus on closely monitoring vulnerabilities such as household and corporate debt to further enhance resilience; and supporting growth, including by reducing government intervention.
Singapore and other APEC Economies release Joint Consultation Paper on the Asia Region Funds Passport
April 16, 2014--Singapore, Australia, Korea, New Zealand, Philippines and Thailand today released a joint consultation paper on the proposed rules and arrangements that will govern the operation of the Asia Region Funds Passport (ARFP).
When implemented, the ARFP will allow fund managers operating in a passport member economy to offer their funds in other passport member economies under a streamlined authorisation process.
he consultation paper sets out the substantive rules that will apply to participating fund managers and passport funds. It also sets out common standards and expectations amongst regulators from passport member economies on the supervision of passport funds, including the protection of investor interests. Following the consultation, the economies that decide to participate in the passport will together work towards the launch of the ARFP in 2016.
view the Consultation Paper: Arrangements for an Asia Region Funds Passport
Source: MAS (Monetary Authority of Singapore)
MNI China Business Sentiment
April 16, 2014--MNI China Business Indicator declines to 51.1 in April from 53.4 in March China Business Confidence Weakens Amid Growing Concerns About the Slowdown of the Chinese Economy Business conditions worsened in April, following weaker economic data, reports of company defaults and policy announcements about only modest economic stimulus measures.
The MNI China Business Indicator fell to 51.1 in April from a three-month high of 53.4 in March, posting the lowest reading since February. Most measures for short-term business expectations also worsened on the month. The MNI Business Indicator has a strong correlation with GDP and suggests economic growth is likely to ease from the 7.7% growth seen in the fourth quarter of 2013. The decline in the headline indicator was accompanied by a fall in the New Orders Indicator, which hit the lowest reading since May 2009, and slipped below the 50 breakeven level for the first time since November 2011.
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Source: MNI Indicators
IMF Working paper-India: Defining and Explaining Inclusive Growth and Poverty Reduction
April 16, 2014--Summary: The IMF has documented the evolution of poverty and inequality across Indian states during the recent period of rapid growth (2004-09), and examine the role of growth and distribution in reducing poverty. Robust economic growth has been a major driver of poverty reduction and inclusiveness in India.
They explore the role of economic policies and macrofinancial conditions in explaining inclusive growth and its components, using a new measure of inclusive growth.
view the IMF Working paper-India: Defining and Explaining Inclusive Growth and Poverty Reduction
Source: IMF
Chinese Businesses Face Competing Tensions on Fast Track to Globalization
To achieve global success, Chinese businesses must address competing tensions, or polarities
Global operating models must focus on culture, governance, processes and people
Report offers six examples of best practice from China's globalization champions
Read the report and executive summary and watch introductory video on the report
April 16, 2014--Chinese companies with active globalization strategies often fall short of growth targets in their international operations because they fail to observe three basic considerations, according to a new report, Emerging Best Practices of Chinese Globalizers: Tackle the Operational Challenges, released today by the World Economic Forum in collaboration with Strategy& (formerly Booz & Company).
In exploring the challenges facing Chinese businesses as they build their global operations, the report identifies three competing pairs of tensions or polarities that contribute to failure to meet growth expectations. These are:
Home Country & Host Country: Building globally unified cultures, governance structures and systems, while making commitments to local countries communities and business practices
Consistency & Innovation: Maintaining consistency and standardization across global operations, while seeking to innovate in products, services and operating models
Control & Empowerment: Maintaining necessary and effective management controls, while empowering local teams for operational efficiency
view the WEF Report-Emerging Best Practices of Chinese Globalizers: Tackle the Operational Challenges
Source: WEF (world Econoic Forum)
BlackRock receives first RQFII licence from CSRC
April 16, 2014--BlackRock has been awarded its first renminbi qualified foreign institutional investor (RQFII) licence by the China Securities Regulatory Commission (CSRC).
The licence has been awarded to BlackRock Asset Management North Asia Limited, a subsidiary of BlackRock Inc, to invest in the domestic capital markets in China, including the A-Share equity and onshore bond markets. BlackRock will apply for investment quotas under the licence from the State Administration of Foreign Exchange (SAFE).
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Source: Asia Asset Management
IMF report-Malaysia: Financial Sector Assessment Program Financial Sector Performance, Vulnerabilities and Derivatives-Technical Note
April 15, 2014--EXECUTIVE SUMMARY
Strong regulatory oversight, coupled with efforts to restructure the banking sector in the aftermath of the Asian financial crisis in 1997-1998, has supported rapid growth in Malaysia's financial sector over the last decade.1 The banking sector has undergone
consolidation while competition has increased following measures implemented under the
Financial Sector Master Plan 2001-2010.
The financial system weathered the 2008 global financial crisis well; the banking sector remained stable due to healthy capital and liquidity
levels, while the impact on the domestic economy was felt primarily through trade channels.
Malaysian banks are presently well capitalized with comfortable tier 1 capital ratios. Domestic banking groups are expected to be able to meet Basel III capital requirements, barring any unforeseen tail-risk scenarios. Although the full implementation of Basel III only begins in 2019, maintaining high equity capital buffers should enhance stability and enables hybrid capital to be retired when they reach maturity or call dates.
Korean investors look to ETFs for international investment themes
April 14, 2014--One manager at KDB Daewoo Securities, Jesse Tyler Buzzie, indicates that he thinks that the gradual increase seen in Korean institutional participation in the ETF market, which now accounts for 24% of ETF turnover there, "could well be the attraction of access to various investment sectors of global markets at very low transactions costs."
While not a solution for every investment objective of the Korean institutional investors, it is increasingly clear that for some, the attraction of ETFs that are managed by leading Korean asset managers using first-tier benchmark companies, such as the MSCI and FTSE, are investment options that are too attractive to pass by.
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Source: ETFI Asia
iShares chief scorns global listing plan for Chinese equities
April 13, 2014--The head of iShares-the world's top provider of exchange traded funds-has poured cold water on plans from MSCI and FTSE to include mainland Chinese equities on their global indices, which are tracked by trillions of dollars of assets.
Mark Wiedman, iShares global chief and a member of BlackRock's executive committee, told the Financial Times...
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Source: FT.com
QDII 2 unveiled in landmark China opening
April 11, 2014--A scheme to link the Hong Kong and Shanghai exchanges and allow institutions and wealthy individuals to trade cross-border is broadly welcomed.
The launch is expected in six months, potentially alongside mutual recognition of funds.
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Source: Asian Investor
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