February 9, 2011

China Hikes Shouldn’t Slow Global Growth

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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

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


December 30, 2010

Hedge Funds Flock Back to Asia

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Hedge Funds Flock Back to Asia

HONG KONG — Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Bloomberg News George Soros, chairman of Soros Fund Management LLC. The hedge-fund firm opened its Hong Kong office in November.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region.

The Wall Street JournaL –



HONG KONG—Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region, said he knows of about 10 global groups that are putting stakes in the ground in Asia.”They’ve said, time to get a little serious, because to be credible with investors they need people on the ground,” Mr. Gray said. Prime brokers provide a wide range of services to hedge funds, including helping them set up and trade shares.

Investors allocated a net $19 billion of new capital to the hedge-fund industry globally in the third quarter, the largest inflow since the fourth quarter of 2007, according to industry data providers Hedge Fund Research Inc.

The biggest funds that can invest around the world say part of the reason money is pouring into their coffers again, especially from U.S. pension funds, is because of their increasing exposure to Asia. As a result, they are ramping up staffing in the region. In contrast, smaller funds and funds of funds remain starved of capital.

“We’ve seen a shift internally of allocations towards Asia because we feel you get a better bang for your buck here at present,” said Des Anderson, a partner in Marshall Wace LLP. The London-based, multibillion-dollar fund has about a quarter of its assets invested in Asia. Its Hong Kong office has doubled in size over the past two years to 30 people, Mr. Anderson said.

Buoyant Asian economies are spurring the hedge-fund charge. The International Monetary Fund forecasts Asian economic growth of 8% this year, with China and India leading the wayat 10.5% and 9.7% respectively.

Tax rates are also a factor. Hong Kong and Singapore compare favorably given their relatively low personal income taxes for higher earners. For Hong Kong, the rate is 17%, and in Singapore it is 20%, compared with 50% in Britain

In one sign that hedge funds are eager to bet on China, revenues generated in Hong Kong from lending stock to hedge funds for short selling recently overtook revenues generated in Japan, historically one of the most heavily traded Asian markets. October is the first time this has happened, according to Dataexplorers, an industry service provider.

Hedge funds often sell short one stock at the same time as they buy another, a tactic known in the industry as a pair trade. Chinese-listed companies are more accessible to investors in Hong Kong than on any other exchange.

The industry’s move eastward comes at a time when the industry is under siege in the West. Investigations into insider trading at hedge funds in the U.S. are roiling the industry. Strict new rules on capital and disclosure requirements for hedge funds in the European Union are prompting some to move to places where they may feel more welcome.

“The EU doesn’t seem to particularly like hedge funds—a move to Hong Kong or Singapore would be natural,” said Ian Mukherjee, chief investment officer of London-headquartered Amiya Capital, which has $1.75 billion under management focused on emerging markets.

Hong Kong and Singapore are both eager to court hedge funds to help boost their credentials as regional financial centers, although evidence of any wrongdoing in other jurisdictions could prompt tougher scrutiny of funds’ activities in Asia too.

This isn’t the first time hedge funds have flocked to Asia. Many set up offices in 2006 and 2007, but either closed or severely cut back their Asian operations during the global financial crisis.

That history raises concerns that the current influx of hedge funds represent hot money flowing into a region where veteran investors are needed to eke out gains. Asia’s markets are relatively shallow compared with those in the U.S. and Europe. Short selling is banned in some places, such as South Korea, and heavily restricted in others, including Australia.

Already, some Asian governments are implementing limited capital controls in order to cope with a flood of money in search of higher yields. Quantitative easing in the U.S. and Japan has speeded up that flow of cash. Capital controls could trip up hedge funds that find themselves unable to exit markets as quickly as they would like during times of turbulence.

Chicago-based Citadel Investment Group LLC ramped up staffing aggressively in Asia during 2005, but closed its Tokyo office and cut jobs in Hong Kong during 2008.

“It feels like we are going back to 2003 where people rushed into the space wanting to spend their money,” said UBS’s Mr. Gray, “but there is not enough people with enough experience of running an Asian portfolio.”

Many hedge funds are also using similar strategies in Asia, which could make it harder for them to make a profit in the region’s less liquid markets. Nearly two thirds of the capital deployed in the region is in long-short strategies, in which funds take long and short positions in stocks at the same time, compared with a third globally.

While big funds are seeing an inflow of money, smaller funds are struggling. In part, that is because big investors such as U.S. pension funds are pouring money directly into large funds, cutting out fund-of-funds middlemen that normally screen start-ups with niche strategies. Globally, funds-of-funds have had net inflows of capital in only two of the last nine quarters, according to HFR.

“Smaller hedge funds are consolidating as they are finding it difficult to raise capital,” said Martin Wheatley, chief executive of Hong Kong’s Securities and Futures Commission. “Bigger hedge funds are benefiting from the environment.”

Making a profit will also be made tougher by rising compliance costs and risk management as regulators beef up oversight of the hedge-fund industry. People in the industry say funds have to make at least $75 million to cover these costs, up from $40 million to $50 million previously


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.


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.


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.


October 6, 2010

Hong Kong: Shares hit 11-month high

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SHARES hit an 11-month high yesterday as dealers welcomed Japan’s decision to adopt a zero per cent interest rate and announce further monetary easing measures to help the economy.

The Hang Seng Index added 20.48 points, or 0.09 per cent, to hit 22,639.14 on turnover of HK$79.69 billion its highest close since November 19.

Insurance firms rose after AIA set the price range for its initial public offering. AIA, hopes to raise up to US$17.1 billion from the IPO.

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