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China inflation falls, giving leeway for stimulus
June 9, 2012--China's inflation fell to a 29-month low in June, giving Beijing more room to fight a deepening economic slowdown.
Consumer prices rose 2.2 percent over a year earlier, down from May's 3 percent, government data showed Monday. Food costs rose 3.8 percent.
Lower inflation clears the way for Beijing to cut interest rates or boost spending to reverse China's deepest slump since the 2008 global crisis with less danger of igniting a spike in politically sensitive living costs. Premier Wen Jiabao warned over the weekend that the world's second-largest economy still faces "huge pressure" to decelerate.
SGX ready to trade RMB securities
July 6, 2012--Singapore Exchange (SGX) announced today it is ready to list, quote, trade, clear and settle securities denominated in Chinese Renminbi (RMB).
The initiative enhances opportunities for issuers and investors keen to participate in the internationalization of the RMB and the robust Chinese economy. SGX’s addition of RMB securities trading complements the offshore RMB bonds already listed on the exchange. SGX is also the world’s first exchange to offer the clearing of OTC FX forwards for RMB.
Issuers listing RMB securities on SGX can also choose to offer dual currency trading, giving their investors the flexibility to trade the security either in RMB or Singapore dollars.
SEC seeks comments on proposed ETF rules
July 6, 2012--The Securities and Exchange Commission en banc has received the proposed rules and regulations on Exchange Traded Funds (ETF).
The SEC invited market participants to submit comments on the proposal.
ETFs are funds that track an index, a commodity, or a basket of assets but trade like a stock on a stock exchange.
Under the proposed rules, the ETF is classified as a "new investment product which is similar to mutual fund but has distinct characteristics."
Asian Investors Warming to Volatility Trading
July 5, 2012--From FinanceAsia.com: In the US and Europe, an increasing number of investors, and some corporations, have woken up to the potential of volatility as an investable asset class that provides effective hedging and, hopefully, profits in difficult market conditions.
A strategy that is particularly appealing in times of extreme market turbulence, volatility displays inverse correlation with traditional asset classes and has been making Western hedge funds money throughout the financial crisis.
Result of the JFTC's Review of the Business Combination between Tokyo Stock Exchange Group, Inc. and Osaka Securities Exchange Co., Ltd
July 5, 2012--Today, Tokyo Stock Exchange Group, Inc. and Osaka Securities Exchange Co., Ltd. (collectively "Companies") received a "Notification To The Effect That a Cease and Desist Order Will Not Be Issued" from the Japan Fair Trade Commission (hereafter the "JFTC").
Upon receipt of this notification, the business combination between the Companies has been approved by the JFTC.
China: The market needs more
July 5, 2012--China has eased. This has been abundantly clear since June’s interest rate cut. While the Chinese government has used its monetary policy tools (the RRR and interest rate cuts), we don’t think these measures alone are enough to boost real demand.
The equity market needs to see more quantitative easing measures from China. In particular, pump priming measures are needed in terms of fiscal policy. These, coupled with coordinated policy action from the US and the EU, could be sufficient to boost investor sentiment. Over the longer term, structural reforms remain the key to maintaining investors’ confidence in China’s ability to move onto a sustainable growth path.
We expect two more RRR cuts this year, but those alone will not likely result in a sustainable rally in our view
The major role of the RRR is to sustain a level of liquidity (along with other policy tools such as open market operations) that will support growth. This is needed to neutralize the potential capital outflows and smaller current account surplus. China started this round of RRR cuts last December, and has now cut the rate three times already by a total of 150 bps. We expect a fourth cut by another 50 bps soon as SHIBOR rates will likely rise again after the recent reverse repo expires. But it will neither surprise nor drive the equity market, in our view, as it will not affect final demand.
There aren’t many instances in China’s economic history for us to benchmark how China’s easing drives the equity market. In fact, over the past decade, the Chinese government has more often struggled with overheating pressures rather than slower growth. But if we use the 2008-09 easing as a benchmark, it is quite clear that the RRR cuts failed to result in a sustainable equity market rally.
view the Macro Matters-China: The market needs more
Tokyo Stock Exchange and Osaka Securities Exchange win regulatory approval for planned merger
July 5, 2012--On 5 July 2012, the Tokyo Stock Exchange Group and the Osaka Securities Exchange received approval from the Japan Fair Trade Commission for their business combination.
The TSE Group will now promptly commence a takeover bid for OSE shares. The two exchanges will subsequently conclude a merger agreement and seek approval at their respective general shareholders meetings. TSE Group and OSE are scheduled to complete the business combination on 1 January 2013.
IMF Working paper-Japan out of the Lost Decade: Divine Wind or Firms' Effort?
July 2, 2012--Summary: A surge of exports in the 2000s helped Japan exit the severe decade-long stagnation known as the lost decade.
Using panel data of Japanese exporting firms, we examine the sources of the export surge during this period. One view argues that the so-called "divine wind" or exogenous external demand boosted Japanese exports. The other view emphasizes the role of supply factors such as productivity gains, materialized after long-fought restructuring efforts during the lost decade. Estimating the firm-level export function allows us to assess the relative importance of these demand and supply factors. Evidence shows that firms' efforts were more important than the divine wind.
view the IMF Working paper-Japan out of the Lost Decade: Divine Wind or Firms' Effort?
DB-Equity Research-Asia-Pac-ETF Market Weekly Review: ETP AUM grew by 23.6% in H1 2012, mainly driven by inflows
July 2, 2012--Market Review
Last week, all the markets in the Asia-Pacific region were in positive territory except China. In all, Japan (Nikkei 225) climbed 2.37%, Korea (KOSPI2) was up by 0.31%, China (CSI 300) slid by 2.01%, Hong Kong (HSI) advanced by 2.35%, Singapore (FSSTI) gained 1.78%, and Australia (S&P/ASX 200) increased by 1.15% over the previous week.
New ETP launches
There was no new listing during last week in the Asia-Pacific region.
ETP Monthly Flows
Asia-Pacific ETP market recorded monthly cash inflows of $4.3bn for the month of June, taking the YTD cash flows to +$19bn or 20.6% of last year’s end AUM. Prior to that, Asia-Pacific region recorded monthly flows of -$664m, $1.1bn and $13.3bn for March, April and May respectively. Equities had the lion’s share in the monthly cash flows contributing $4.1bn, with fixed income and commodities registering $204m and -$16m respectively.
Within Equity products, Developed Country ETFs emerged as the single largest recipient of monthly cash flows totaling $3.6bn. ETFs offering exposure to country indices attracted robust inflows; Japan, Taiwan and Korea received $3.4bn, $356mn and $195m respectively.
Turnover Review
Asia-Pacific ETP turnover totaled $6.3bn for last week, 40.1% up from the previous week’s total. South Korea comes to be on top of the turnover ranking with $3.1bn, followed by China ($1.3bn), Hong Kong ($0.9bn), Japan ($0.6bn), and Australia ($0.2bn). Among Equity ETFs, Emerging Country, Leveraged Strategy, Short Strategy, and Asia Pac Developed Country ETFs recorded total turnover of $2.9bn, $1.4bn, $0.8bn and $0.7bn respectively. Under the Commodity asset class, turnover in Gold ETPs totaled $81m.
Asset Under Management Review
Last week, Asia-Pacific ETP AUM ended at $113bn. On a year to date basis, Asia-Pacific ETP assets are up by $21.5bn or 23.6% above last year’s closing.
Japan economy faces same risks as Europe: PM
June 30, 2012--Japan faces the same risks that plague financially-embattled European states, Prime Minister Yoshihiko Noda warned Saturday, days after he pushed through a divisive tax bill to chip away at the country's mountainous debt.
Noda's statement comes a day after leaders from the 17 countries sharing the euro struck a deal to direct emergency measures at Italy and Spain and boost the ailing economy.
"Countries like Italy and Spain have made desperate efforts" towards financial recovery, Noda said.
