Asia Financial Industry Blog

October 23 2007

Bear in a China Shop

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Not to miss the ‘invest in China’ boat, yesterday, Bear Stearns and Citic Securities announced a co-investment partnership agreement. If everything is approved by the regulators, which it likely will be, Bear, the darling of the CDO market, will invest US$1B in the Chinese brokerage, which will convert to a 2% stake over 6 years with the option to increase that to 7%. Conversely, Citic will invest the same in Bear, which will convert to 6% stake in Bear over 40 years, and will have the option to increase this stake to 9.9%. Most of the non-Chinese operations will likely be a co-branded operation and it’s yet unclear what the Chinese operation will look like.

October 18 2007

China: Stock Dormancy

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For the past few weeks, most of the major news in China has centred on the Communist Party Congress. This is an pretty important event in China that happens once every 5 years and usually results in a number of far-reaching policy and people changes throughout the country and government.

 

October 08 2007

China: Profits up, NPLs down

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The China Banking Regulatory Commission recently reported Chinese banking industry numbers and for a brief comparison:

October 03 2007

Dubai: If you build it...

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So whilst everyone was making final preparations for SIBOS this past weekend, I was in Dubai keeping good on a long standing promise to visit a friend.

September 26 2007

China: Barbie and Goldman

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Lead Toys

With recall troubles dating back to 2005 when a toddler in the US ate a loose magnet and later died, the toy manufacture Mattel has been in the centre of a toy recall that has thousands of class-action lawyers around the world drooling. The company has gone through numerous recalls in the past few months, the largest being for 18 million playsets plagued by another loose magnet.

September 17 2007

Singapore: Bubble? What bubble?

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On a recent trip to Singapore, I was shocked to see that the 3 bedroom flat that I used to rent with a few people in 2004 for SGP$2,100 was now renting for SGP$4,300. Just over double in 3 years. Now what becomes even more eye-opening is if you take the USD exchange rate fluctuations into account, for those of us still clinging to greenback savings, the rise is closer to 230%. Indeed, according to government statistics, the prices are continuing to rise: in Q2, rents rose 10% and private-home prices rose 8.3 percent, the fastest in 8 years. Now, that’s not so bad when you consider Singapore’s GDP grew a healthy 7.9 percent last year, but it is worrying nevertheless.
September 12 2007

intel inside China

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This past weekend Craig Barrett was in China for the ceremonial groundbreaking on the brand spanking new site for Intel’s latest US$2.5B factory or “fab”. Scheduled to start production in 2010, the fab is the largest investment by Intel in China to date and represents Intel’s “continued commitment to China."

September 07 2007

China: Flying and Banking

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This week Singapore Airlines (SIA) bought a ~16% stake in China Eastern, a domestic Chinese airline, which is in the worst financial condition of the big three Chinese carriers. This by itself is groundbreaking news as it’s the first foreign investment in a domestic Chinese airline, but when you consider the recent takeover bid for Qantas in Australia and indeed SIA’s own failed bid for takeoff slots in Australia, it becomes even more interesting as a comparison of markets and their openness to change.

China, well known for its capital controls made some steps towards loosening those controls for individual investors last month with the announcement that individual mainland Chinese investors would be able to invest in the HK stock market. However, now it appears the implementation will be another few days or weeks off according to an announcement by the Bank of China (BOC).

September 04 2007

Moving the back office to Beijing

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A few days ago, the Beijing Municipal government (separate from the national government) issued a report promoting the capital city as a new back office operations centre for the financial sector. Using a raft of incentives such as discounts on registration payments, and subsidized housing and land, Beijing is looking to attract all types of back functions to four new specially designated zones in the capital. Apparently Goldman Sachs / Gao Hua Securities, “Swiss Bank” (?) and Deutsche Bank have been in discussions about shifting some of their back office work there; the People's Bank of China, Agricultural Bank of China and the R&D arm of China Life Insurance Company have already signed contracts to relocate to the financial zone.

August 28 2007

China - subprimed or not?

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Reading Bank of China’s ticker last week was a crash course in China’s stock markets. Towards the end of last week, the bank reported on its sub-prime exposure. On the next trading day, if you were given the two ticker symbols for Bank of China (BOC) and their positions, you’d be hard pressed to guess what BOC’s actual position was. In HK, BOC fell by as much as 5.4% over the course of the trading day*, while in Shanghai, the stock actually rose 1% on a day when the entire market rose 5% overall. What happened?

 

Earlier this week we looked at how the Shanghai market has remained relatively unscathed by the sub-prime meltdown, but what about individual banks' exposure?

 

Losses through the week in major indices around the world and indeed in emerging market countries in Asia, have chipped away yearly gains that most indices have chalked up this year. China's Shanghai index however is up nearly 78% on the year. How is it possible?

The People’s Bank of China (PBOC) has hiked the reserve requirement by 50bps, to 12%, effective from August 15. The reserve requirement rate is now approaching the threshold of 13%, common back in 1988-98. This is the fifth time that the PBOC has tightened the reserve requirement policy this year, the last being a hike on July 20th.

 

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