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May 7, 2011

China To Allow Next QFII Investment To Trade Stock Index Futures

Filed under: Uncategorized — bigcapital @ 5:37 pm
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China To Allow Next QFII Investment To Trade Stock Index Futures

MarketCall.net — May 07, 2011

BEIJING, — China’s securities watchdog has published draft rules that will allow approved foreign investors to trade stock index futures, the first step in opening up its local securities market.

But the Qualified Foreign Institutional Investors (QFII) will only be allowed to trade stock index futures for hedging purposes, and it will be counted as part of their existing investment quotas, according to the proposed rules published by the China Securities Regulatory Commission (CSRC) late on Friday.

China officially launched the QFII system in 2003, and Beijing had granted investment quotas worth $19.7 billion in total to 97 foreign institutions by the end of 2010 — only a tiny proportion of China’s 20 trillion yuan stock market.

CSRC has also decided to allow domestic securities brokerage firms to buy more products with their own money, a move towards deregulation that could potentially boost incomes of local securities firms.

Source : http://www.marketcall.net/

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February 9, 2011

China Hikes Shouldn’t Slow Global Growth

Filed under: Uncategorized — bigcapital @ 1:09 am
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China Hikes Shouldn’t Slow Global Growth

China has raised benchmark interest rates for the third time since October.

Unsurprisingly, rising inflationary pressures is the primary motivation behind China’s rate hike. We have been looking for another rate hike from China since they tightened in December and with prices rising due to geopolitical risks, the Lunar New Year and a recent drought in the grain producing Northeast part of the country, China did not want to take any risks, opting to preempt a further increase in inflationary pressures by raising interest rates. Given the health of the Chinese economy and the prospect of stronger global growth, we have not seen the last of China’s policy actions.

Capital Economics analysts note that they think markets are right to have taken China’s latest decision to raise interest rates in stride. The announcement has caused some jitters about the impact tightening will have on growth but these concerns should not be overplayed as the rate hikes should not do much to slow growth, they say. Aggressive monetary tightening should not be needed in China, they say.

From The Dow Jones Newswires

http://marketpin.blogspot.com/

February 08, 2011 11:29 ET (16:29 GMT)

February 2, 2011

Bernanke: The Dollar System Is Flawed

Filed under: Uncategorized — bigcapital @ 9:18 am
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Bernanke: The Dollar System Is Flawed

Federal Reserve Chairman Ben Bernanke’s speech in Frankfurt may be one of the most important and underreported events since America abandoned the gold standard. In it, he said the dollar standard was flawed and that America’s trade deficit was imperiling America.

 “[I]t would be desirable for the global community, over time, to devise [a new] international monetary system,” he said.

 Never before has a Fed chairman made such an admission. Never before has one ever disparaged his own currency in such a way.

“The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way. “

 On November 19, Ben Bernanke told a room full of bankers in Frankfurt, Germany, that the world’s sense of common purpose had waned. Tensions among nations over economic policies are intensifying, he said. It threatens the world’s ability to find a solution.

 U.S. unemployment rates are high, he told the gathering, and given the slow pace of economic growth, likely to remain so. Approximately 8.5 million jobs have been lost so far, and when you take into account population growth, the size of the employment gap is even larger, he said.

 Unemployment may get even worse before it gets better.

 “In sum, on its current economic trajectory the United Sates runs the risk of seeing millions of workers unemployed or underemployed for many years,” lamented Bernanke. “As a society, we should find that outcome unacceptable.”

 In an effort to win European allies, America’s most powerful banker then went on the attack—blaming China for causing much of the economic and trade imbalances destabilizing the current dollar-centric economic order and threatening the world’s economy.

 China is manipulating the market to keep its currency undervalued, he charged. This has led to imbalances.

 Each month China sells tens of billions of dollars more worth of goods and services to America than it purchases in return. Many American economists claim this is because of China’s undervalued currency, which makes Chinese goods less expensive in America and American goods more expensive in China.

 Coupled with China’s low-wage, low-taxation, low-regulatory, non-union environment, resulting in the relocation of millions of American jobs overseas, China has received a huge economic boost at America’s expense.

 This is a primary reason nations like China have fully recovered from the recession while America is still mired in it, noted Bernanke. America can no longer afford to let China drain the U.S. economy.

But what to do about it?

 “As currently constituted, the international monetary system has a structural flaw,” said America’s chief banker. The dollar system is broken. “It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances” (emphasis mine throughout).

“In the meantime, without such a system in place, the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity.”

 Thus Bernanke told his German audience to prepare for “market-based or otherwise” unorthodox—even radical—action by the Fed to try and force China to revalue its currency and rebalance the global economy.

 The “flaw” has been declared. But what is Bernanke going to do?

 “Bernanke is alerting the world to the most important shift in U.S. trade policy in more than a generation,” writes economic analyst and author Richard Duncan. “The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits.”

 “If the flaw cannot be corrected through international coordination, then unilateral actions by the United Sates should be anticipated,” Duncan warns.

 And if history is a guide, that means tariffs and trade duties.

 The first major shots of trade war may be about to be fired—and the Fed has just given its blessing. If you look back on the 1930s and that disastrous time period, protectionism is lethally contagious and predictable. Global trade and commerce will contract. Import prices will rise. Unemployment will skyrocket. And that is just for starters.

 During the Great Depression, America was not burdened under record debt. The economy entered that age of trade warfare from a position of strength, and still the economy got ruthlessly battered.

 A trade-war-induced depression today would potentially be far worse—and not just because the United States has become the greatest debtor nation in all history, but because this time, the credibility of America’s government, its central bank and its currency, are all now in question.

 Besides tariffs, Mr. Bernanke’s declaration that the international monetary system is broken also means the Fed will engage in as much “quantitative easing” as necessary to compensate for what he sees as its “structural flaws.”

 During the G-20 meeting in South Korea two weeks ago, President Obama and Treasury Secretary Timothy Geithner were forced to defend the Federal Reserve’s decision to print dollars to finance government spending and depreciate the value of the dollar.

 Foreign nations saw it as a way for America to renege on its debts.

 Bernanke’s Frankfurt defense of the Fed’s “quantitative easing” will do little to reverse that sentiment. “Fully aware of the important role that the dollar plays in the international monetary and financial system, the [Fed] believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States,” Bernanke said.

 In order for America to support the value of the dollar, it will devalue it, said Bernanke. The incongruity is palpable—and surely wasn’t lost on America’s bond holders. Every time the Federal Reserve hits the “print” button, creating money out of thin air, it devalues the dollars in existence. America’s lenders (of which the Chinese are the largest) have been put on notice that they will be paid back in depreciated dollars.

 Be prepared for more quantitative easing—or, as it has become known overseas, quantitative fleecing.

 And be prepared for the Federal Reserve’s antics to succeed all too well.

 Foreign nations, and America’s foreign creditors, grow more dissatisfied with the dollar as the world’s reserve currency every day. The move to adopt a new reserve currency system is gaining momentum. When this happens, the Federal Reserve will get a whole lot more international cooperation in meeting its goals than it could have ever wanted.

 The Fed won’t be trying to devalue the dollar anymore—it will be doing everything it can to prop it up.

 Unfortunately, with faith in the dollar broken, the government unable to borrow money and a global trade war ravaging the U.S. economy, America will pine for the structurally “flawed” but comparatively good old days.

 “The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way.”

– MARKET TALK –

December 30, 2010

The Federal Want To Pressure Down U.S Dollar Worldwide

Filed under: Uncategorized — bigcapital @ 9:23 am
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The Federal Want To Pressure Down U.S Dollar Worldwide

There is a saying in the investment business, “don’t fight the Fed.”

Fed Swap Lines Purposely Keeping Dollar Weak

Central banks provided two pieces of market supportive news in the past 48 hours.

China announced its intent to buy Portuguese bonds, and the Federal Reserve extended its “swap lines” deep into 2011:

# China Ready to Buy Up to $6.6B in Portugal Debt (Reuters : http://www.reuters.com/article/idUSTRE6BL0Y220101222 )

# Fed Extends USD Swaps With Major Central Banks (Reuters : http://www.reuters.com/article/idUSTRE6BK3PS20101221 )

Via Reuters, the swap lines, at first set to expire next month, will now run til August 1st.

The lines were first opened to the ECB and SNB — the European and Swiss central banks respectively — and were later expanded to multiple additional central banks, including those of Sweden, Mexico and Brazil.

The August extension applies to the Fed’s counterparts in Europe, Japan, Canada, England and Switzerland.

So why is the Fed doing this? Straight from the horse’s mouth (official Fed statement):

“[The swap lines] are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets.”

That’s the official justification. A between the lines reading is slightly more self serving: The Fed wants to keep the dollar weak — or otherwise keep it from rising too much.

As you can see, from 2002 onward the $USD had been declining — a trend perceived as good for everyone. As Americans gorged on “stuff,” the vendor finance arrangements put in place by China and Middle East oil exporters allowed the party to continue unabated.

Long term interest rates were kept low via the recycling of $USD back into treasury bonds, in turn keeping mortgage rates low and perpetuating the housing bubble. Meanwhile many emerging markets enjoyed rapid growth — courtesy of a binging U.S. consumer — as the leverage and credit boom radiated outward.

But then, as things fell apart in 2008, the $USD saw a dramatic surge. A wave of panic swept the globe as the supernova debt boom collapsed. Trillions of dollars in credit flows evaporated, and American investors effectively “short” dollars (via overseas investments and ‘carry trade” type arrangements) had to cover with a vengeance.

As the chart shows, the $USD saw another upward surge in early 2010, first on China fears, and then eurozone sovereign debt fears as the Greek situation ignited. (This is when the Economist’s Acropolis Now cover was published — a keepsake to be sure.)

So, as you can guess, one of the many fears keeping Ben Bernanke awake at night is the possibility of a surging $USD.

Not only is the dollar a “risk-off” fulcrum, balanced against “risk on” for all other paper asset classes, a rising buck is also a political headache for the Obama White House and other American interests seeking a U.S. export revival.

So, back to those swap lines. Why and how would they be an attempt to keep the dollar down?

Well, first consider what a swap line actually is. From the Federal Reserve website:

In general, these swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months.

In layman’s terms, we can think of a swap line as a standing guarantee of U.S. dollar liquidity. If you (as a central banker) ever need greenbacks in a pinch, you know you’ll be able to procure them instantly, no matter how “tight” the open market may be.

This standing guarantee reduces the odds of another violent $USD spike of the type we saw in late 2008. In a way, one can think of it as “short squeeze insurance.”

The many players around the world who are “short” U.S. dollars — by way of lending arrangements denominated in dollars and so on — have spiking dollar risk implicit in their positioning.

What the Fed has essentially said to these players is, “It’s okay for you to keep borrowing in dollars, because in the event of a new liquidity crisis we will create accessible dollars for you (via the channel of your local CB).”

Consider, too, the conditions under which all these central banks would be pushed to draw on their $USD swap lines at the same time.

By definition, these would be crisis conditions in which availability of $USD was scarce relative to near-term surging demand.

In such conditions, the Federal Reserve would have to create more dollars to meet existing outsized demand (as crisis-driven preferences for holding $USD, or covering short $USD obligations, would create a shortage).

So the liquidity promise is also a sort of printing-press promise: In the event of another crisis, the Fed will be on its toes and ready to “print” however much fresh $USD the world needs.

The really neat trick is, simply in making this promise, the Federal Reserve can achieve its aim of keeping the $USD down. This effect is produced even without the Fed doing anything.

How? Simple:

* The Fed has promised $USD liquidity will be there “if needed.”
* This promise can be “taken to the bank” — literally.
* Commercial institutions can thus rest easier with short-dollar liabilities.
* To wit, whether one is a bank, a commercial operator or a speculator, it’s very tempting to borrow in $USD these days — to leverage the greenback via some form of debt arrangement and participate in the “carry trade.”

But this move could also be considered risky due to the possibility of carry trade reversal and crisis-driven supply/demand crunch … and so, with the extension of the Fed swap lines, Uncle Ben has stepped up and said “Hey, no problem, carry trade away — we’ll be there in a tight spot (via printing press) to provide liquidity for you.”

And so the dollar stays suppressed, and everyone stays happy (apart from those pesky “non-core” inflation watchers, and anyone else feeling a cost of living crunch).

December 26, 2010

M&A tops $2.2 trillion in first yearly rise since 2007

M&A tops $2.2 trillion in first yearly rise since 2007

LONDON/HONG KONG (Reuters) – Mergers and acquisitions rose for the first year since 2007, potentially marking the start of a new, multiyear M&A cycle in which emerging economies account for a bigger share of global dealmaking.

Thomson Reuters data showed announced M&A grew nearly a fifth this year, to $2.25 trillion globally. The preliminary figures show emerging markets made up a record 17 percent of transactions, and energy was the busiest sector.

Next year could be busier still. Executives, bankers, big investors such as Schroders, and analysts at banks including Credit Suisse, Nomura, and Societe Generale are among those predicting a further rise.

Cheap debt, record cash piles, the need to outpace sluggish economic growth, and positive market reactions to many deals in 2010 should embolden companies to strike more deals, they say.

“We feel M&A volumes will improve next year, there’s certainly going to be more cross-border activity than ever, and Asia — again — will be a bigger part of the equation,” said Scott Matlock, chairman of international M&A at Morgan Stanley .

Deutsche Bank , the world’s fifth-busiest merger adviser, said next year could bring a bigger rise.

“The increase in M&A activity in 2011 should exceed that of 2010,” said Henrik Aslaksen, Deutsche’s global head of M&A.

“There’s more confidence, there’s ample liquidity, financing costs are attractive, and there’s an intense focus amongst corporates to identify growth opportunities,” he added. “The pipeline is very broad-based. It’s not just confined to one to two sectors.”

Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found.

GOLDMAN LEADS

That means 2011 could be the second of several years of rising deals — earlier this year Citi analysts said the world was “in the foothills” of a new M&A cycle. These cycles typically last years: the last peaks came in 2000 and 2007.

Bankers say a combination of cheap stocks, as measured by price-to-earnings ratios, and even cheaper debt means many deals would offer a big boost to earnings.

The optimism comes despite a slower fourth quarter and the worst spate of withdrawn deals since the height of the credit crisis: two collapsed BHP Billiton deals, in Canada and Australia, alone cut $100 billion from M&A volumes.

Jeffrey Kaplan, global head of M&A at Bank of America Merrill Lynch , said it was still “challenging to get deals done,” despite “good momentum going into 2011 for both corporate and private equity activity.”

With about a fortnight to go, Morgan Stanley is lagging archrival Goldman Sachs , after beating it to the No. 1 ranking last year for the first time in 13 years.

Goldman Sachs, under M&A head Gordon Dyal, has advised on $513.1 billion of deals to Morgan Stanley’s $499.5 billion.

‘LAND-GRAB’

Emerging markets deals hit a record $378 billion, while developed markets lagged. Global M&A increased 19 percent, while U.S. M&A rose 11 percent and activity in Europe climbed 5 percent.

Colin Banfield, Citigroup’s head of M&A for Asia-Pacific, said currency rates were aiding the region’s companies, which were growing “more ambitious” and contemplating bigger deals.

But aside from several major telecommunications tie-ups in the developing markets, and the odd banner deal such as Chinese carmaker Geely’s purchase of Volvo from Ford, many deals from newer markets were aimed at securing resources or technologies.

“We’re still in the early days of emerging markets M&A,” said Matlock at Morgan Stanley.

“When it gets really hot is when people decide they want to buy and build truly global multinational corporations, and we’re not there yet. It’s more focused on acquiring natural resources or on opportunistic deals.”

Energy and power was the year’s busiest sector, with a near-40 percent rise in announced deals to $482 billion, followed by the financial and basic materials sectors.

Asian companies including China’s Sinopec Corp and Thailand’s PTT Exploration and Production struck deals that ranged from buying stakes in oil fields to Korea National Oil Corp’s hostile takeover of Britain’s Dana Petroleum.

“Asian players, led by China, are making a land-grab for resources to fuel their economies for many years into the future,” said Jeremy Wilson, co-head of natural resources at JPMorgan .

December 20, 2010

China Business News: Shanghai’s foreign trade hits record US$34.51 bln in Nov

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China Business News: Shanghai’s foreign trade hits record US$34.51 bln in Nov

Dec. 20, 2010 (China Knowledge) – Shanghai’s import and export value grew 31.5% year on year to a record US$34.51billion in November this year, according to the latest statistics released by the Shanghai Statistics Bureau.

The city’s exports were US$17.11 billion last month, up 27.2% year on year, while its imports rose 36.1% from a year earlier to US$17.4 billion.

The export value of mechanical and electronic products increased 23.4% year on year to US$12.56 billion in November, while the import value of such products was US$9.93 billion, up 31% from the same month of last year.

The city’s exports and imports of high-tech products were US$8.17 billion and US$6 billion in the month, up 19.6% and 23.4% year on year, respectively.

Last month, Shanghai’s exports to its top three trade partners, the E.U., the U.S. and Japan, were US$3.85 billion, US$4 billion and US$1.95 billion, up 14.8%, 30.6% and 39% year on year, respectively, while imports from the three partners were US$3.29 billion, US$1.87 billion and US$2.86 billion, growing 30.1%, 22.4% and 37.1% year on year, respectively.

Source: http://marketpin.blogspot.com/

December 17, 2010

China Credit – S&P Raises China’s Long-Term Sovereign Rating – CNBC

China Credit – S&P Raises China’s Long-Term Sovereign Rating – CNBC

S&P Upgrades China’s Credit Rating

BEIJING—Standard & Poor’s Ratings Services upgraded China’s sovereign-debt rating, citing its large foreign reserves, strong fiscal position and positive growth outlook.

S&P raised its rating on China’s sovereign debt to double-A-minus from A-plus, reflecting “the government’s modest indebtedness, a strong external asset position, and our view of the economy’s exceptional growth prospects,” the agency said Thursday.

The announcement from S&P follows a similar move by Moody’s Investors Service, which raised its rating for China’s sovereign debt last month.

S&P said the government may face “contingent liabilities in the banking system that could materialize if an extended economic slowdown unfolds,” but that China’s many strengths outweigh that potential pitfall.

The upgrade amounts to a vote of approval for China’s response to the financial crisis. “We believe the Chinese authorities would respond to future threats to financial stability with timely measures, based on our observation over the past two years,” S&P analyst Kim Eng Tan said.

Implementing structural reform during the global slowdown improves the likelihood of macroeconomic stability, S&P said in a statement.

“We may raise the ratings again if structural reforms lead to sustained economic growth that significantly lifts the average income level,” Tan said.

December 1, 2010

China Approves Gold Fund Of Funds

Filed under: Uncategorized — bigcapital @ 9:15 am
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China Approves Gold Fund Of Funds
HONG KONG (MarketWatch) — China’s securities regulators have given the go ahead for a mutual fund to invest in foreign exchange-traded gold funds, potentially tapping interest among mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation.

 Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund, the first of its kind for mainland China, according to a statement posted on the Beijing-based fund provider’s website.

 The fund has been granted permission to invest outside of China under the Qualified Domestic Institutional Investor (QDII), the fund managers said in the statement.

 The fund will invest in gold-backed exchange-traded funds operated outside of China, though the fund provider’s statement didn’t specify which ETFs, or which markets, it was considering.

 Hong Kong launched its own gold-ETF earlier this month, back by bullion held at a government-run depository at the city’s international airport. See report on Hong Kong’s first locally backed gold ETF.

 The QDII scheme enables financial institutions to invest in overseas markets and is widely seen as a vehicle to allow capital outflows from China at a time when the currency is not freely traded, prohibiting China’s vast pool of savers from investing abroad.

 One-year yuan deposits at the Bank of China Ltd., for example, fetch 2.5%, with the People’s Bank of China having last hiked its policy rate by a quarter-point in October.

 However, cash kept in these savings accounts are actually losing purchasing power at a dramatic rate, as with consumer prices in October 4.4% higher than they were a year earlier, and with the inflation rate expected to hit 5% in December, according to estimates by Bank of America- Merrill Lynch.

 The state-run China Daily said Tuesday that the new gold fund was the first of it its kind to be available to mainland investors.

 More funds could be on the way soon, as several other fund providers have pending applications for similar products, seeking to tap rising interest among mainland Chinese investors for precious metals, the report said
-Market Watch-

November 9, 2010

China’s President Visits Portugal, Eyes Investment

Filed under: Uncategorized — bigcapital @ 9:00 am
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China’s President Visits Portugal, Eyes Investment

China will back Portugal’s efforts to deal with fallout from the world financial crisis, President Hu Jintao said on Sunday, but he stopped short of promising to buy Portuguese bonds as the debt-ridden country had hoped

“We are willing to take concrete measures to help Portugal cope with the global financial crisis,” he said after meeting Prime Minister Jose Socrates, without elaborating.

LISBON, Portugal – Chinese President Hu Jintao has started a two-day state visit to Portugal where officials are hoping investments by Beijing will help revive one of the European Union’s frailest economies.

China has been using its large foreign currency reserves to expand its economic presence in western Europe.

Hu traveled from France where companies won deals with China worth euro16 billion ($22.8 billion).

In Portugal, Hu is expected to preside over the signing of trade agreements and private sector investments.

Hu was meeting Saturday with Portuguese President Anibal Cavaco Silva. On Sunday, he was due to hold talks with Prime Minister Jose Socrates.

Hu is accompanied by a delegation of Chinese company executives.

Last month, Premier Wen Jiabao promised to buy Greek government bonds when Athens returns to markets, in a show of support for the country whose debt burden pushed the euro zone into crisis and required an international bailout.

Portugal, which unlike Greece still sells bonds on financial markets although at high cost, had hoped for a similar promise as it is trying to soothe investors’ concerns about its ability to cut a high budget deficit and rein in ballooning debt.

Deputy Foreign Minister Fu Ying, who is part of the Chinese delegation visiting Europe, told Reuters on Saturday that Beijing remained committed to investing in European bonds and was willing to lend Portugal a helping hand.

The Chinese government faces criticism at home over losses which state entities incurred during the global crisis. But Beijing may calculate that using part of its huge foreign currency reserves to support troubled European countries would help to deflect international criticism of its trade policies and its refusal to let its yuan currency appreciate sharply.

Portugal and China also signed several cooperation treaties in areas such as financial services, logistics, renewable energy and tourism, and agreed to work to double their bilateral trade by 2015.

Hu said he would encourage Chinese companies to invest in Portugal, while China also wanted Portuguese firms to sell more goods in the world’s most populous country.

HIGH DEBT PREMIUMS

A stern-looking Socrates thanked Hu for a “personal effort” to achieve not only the doubling of trade and more mutual investment, but also “a more balanced relationship so that both our peoples can benefit from this ambition.”

Portuguese imports from China in the January-August period jumped 47 percent to 1.03 billion euros ($1.45 billion) from last year, while exports to the world’s second largest economy in the first eight months of the year totaled just 149 million euros.

Investors’ concerns that Portugal may fail to rein in its budget deficit and debt have caused its debt premiums to soar this year, raising the risk of a Greek-style bailout.

But the minority Socialist government maintains it will meet the budget deficit target of 7.3 percent of GDP this year and 4.6 percent in 2011 year. It is betting on higher exports to avoid a new recession next year, when tough austerity measures such as higher taxes and wage cuts will start.

In an example of possible investment, Portugal’s largest company and utility EDP said China Power Holding International (CPI), with which it signed an agreement for a potential partnership, expressed interest in buying a stake in the Portuguese company.

“Given the strategic significance the cooperation partnership may have, CPI has manifested its interest in a potential entry into EDP’s capital,” EDP said in a statement.

October 22, 2010

Z-Ben expects rise in QDII fund launches, spies opportunity

Filed under: Uncategorized — bigcapital @ 8:38 am
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Z-Ben expects rise in QDII fund launches, spies opportunity

The consultancy says a ramp-up in QDII fund launches over the next year will offer foreign asset managers a key opportunity as these players seek to develop unique products and yet balance costs.

Consultancy Z-Ben Advisors expects new QDII product launches to continue expanding in China over the next year, adding that a valuable opportunity is about to present itself to foreign firms with a domestic partner.

Yesterday, Shanghai-based fund manager Fullgoal revealed that its inaugural “Qualified Domestic Institutional Investor” (QDII) fund had attracted Rmb828 million ($124 million) in assets – above this year’s QDII fundraising average of Rmb550 million.

QDII funds delivered a strong performance in September, returning 7.72% on average versus 2.35% for the average domestic equity fund. Two QDII funds even returned in excess of 10% last month – figures that could spur fresh demand among local investors.

Z-Ben has counted as many as 12 new QDII funds in the product development process and is predicting that at least 60 QDII mutual funds will be available on the market by the end of 2011.

“As the universe of domestic, onshore products becomes increasingly crowded, QDII funds remain the last uncontested territory,” says Francois Guilloux, director of regional sales at Z-Ben Advisors. “This, in turn, means there should be an increasing number of new QDII funds coming to market over the next year.”

Guilloux notes that such a trend is already underway as a number of mid-tier fund managers prepare to launch their respective products. These include the Huatai-Pinebridge Leading Asian Enterprise Fund, while others, such as Citic Prudential, are in the process of applying for product approval.

Adding to the momentum are firms that are preparing a second QDII product launch, including E-Fund and China International.

However, Z-Ben suggests it’s premature to conclude that demand for offshore products among domestic Chinese investors is re-emerging in any meaningful way.

Attempting to provide a counterbalance argument for above-average inflow into Fullgoal’s fund, Guilloux notes that the firm is already known as a strong manager of fixed-income funds, and demand for bond funds domestically has stayed strong, averaging Rmb3.1 billion per new product in September.

He also questions whether QDII funds will continue their outperformance this month, given that the CSI 300 has risen by 11.2% so far in October.

“Even if QDII funds were to continue to outperform domestic asset classes, Chinese investors are still likely to balance these gains against concerns of the negative effects from an appreciating renminbi,” Guilloux adds.

He notes that, while new QDII funds are expected to rise over the next 12 months, fund managers will need to keep one eye differentiation and the other on keeping costs under control.

But he suggests that this balancing act could provide a new set of opportunities to foreign asset managers, especially if local firms were to shift more aggressively towards the fund-of-fund product structure.

“For those firms which have developed a relationship with any Chinese fund manager over the past two years, Z-Ben Advisors would strongly advise reconnecting with your contacts,” says Guilloux.

“Your counterpart’s need to develop unique offshore products, while simultaneously balancing costs and returns, means that a valuable opportunity is about to present itself.”

Source: Visit MARKETPIN http://marketpin.blogspot.com/

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