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From WSJ’s Davos blog:

Standard Chartered PLC remains bullish on the major Asian economies of India and China, encouraged by the policy outlook for the two countries this year, the bank’s Asia chief executive said.

The U.K.-based lender, which focuses almost exclusively on Asia and emerging economies, also sees European rivals retreating from those markets as they are beset with challenges at home, Standard Chartered Asia Chief Executive Jaspal Bindra said in an interview on the sidelines of the World Economic Forum.

In India last year, Standard Chartered confronted a range of challenges including slowing growth, rising interest rates and a depreciating rupee. Revenue from the bank’s India unit fell by 12% in the first half of 2011 and by the “mid-teens” in the third quarter, Group Finance Director Richard Meddings said earlier.

Mr. Bindra blamed higher interest rates. “Interest rates went up almost 400 basis points in a short period, and it is very difficult, if you do wholesale business with the best clients in the country, to pass on a 400 basis point increase at any one time.”

But the central bank’s surprise move to loosen monetary policy this week has sent a “clear signal” that there will be no further rate hikes and the government is shifting its focus to promoting growth, Mr. Bindra said.

The Reserve Bank of India Tuesday held its key lending rate steady for a second straight policy meeting but cut the minimum cash reserve requirement by 0.50 percentage point to ease liquidity.

“The government has for a long time shown a huge preference to manage inflation through monetary policy,” he said. But following the RBI cut, “I think we will see a more balanced approach.”

Mr. Bindra also said that the recent “normalization” of the rupee exchange rate — it is up 6% against the dollar so far this year after declining 15.1% in 2011 — will encourage renewed foreign investment.

In China, Mr. Bindra believes authorities will be successful in guiding the economy to a “soft landing” ahead of a leadership transition at the end of the year.

“The priority for all of 2012 and beyond is going to be ‘how do we keep things stable,’ as they have this transition of power at the top,” he said, adding that not just the top political leadership, but also the leaders of major financial institutions and regulators are all due to be reshuffled. “It is quite a massive-scale change of power.”

As European banks regroup and retreat from Asia, Standard Chartered sees an opening. The trend is especially pronounced in industries including shipping and commodities and in markets like Indonesia and India where dollar liquidity is scarce, he said.

“It gives us an opportunity to scale up market share, and second, it gives us a little bit of pricing advantage.”

– Aaron Back. Follow him on Twitter @AaronBack.

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

In 2009, China announced that by 2020 it would reduce carbon intensity 40% from 2005 levels.

The government has also focused on foreign trade as a major vehicle for economic growth.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

The technological level and quality standards of its industry as a whole are still fairly low, notwithstanding a marked change since 2000, spurred in part by foreign investment.

China’s increasing integration with the international economy and its growing efforts to use market forces to govern the domestic allocation of goods have exacerbated this problem.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

” Although the figure is already “quite amazing,” the volume is “not large enough” considering China’s economic growth and local companies’ expanding demand for international opportunities, Shen said.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.

Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork).

Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum.

China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.

Major industrial products are textiles, chemicals, fertilizers, machinery (especially for agriculture), processed foods, iron and steel, building materials, plastics, toys, and electronics.

Brick, tile, cement, and food-processing plants are found in almost every province.

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Davos: StanChart Bullish on China, India

China’s real estate scene is reminiscent of the 2007 US market: developers are slashing prices and infuriating owners who paid top yuan for properties. Problems in the real estate market are extending into steel, banking, mining and other sectors. Vacant developments are numerous because wealthy Chinese savers have few alternatives for investing growing wealth. “Beijing’s response to the global financial crisis added jet fuel to the fire,” writes Patrick Chovanec for Foreign Affairs, arguing that investors, not urban residents contributed to the bubble. “To maintain GDP growth of nearly ten percent during a massive downturn in global demand, China’s leaders engineered a lending boom that expanded the country’s money supply by roughly two-thirds.” Developers, after ignoring warnings to ease up on capacity, have urged the government to lift restrictions on owning multiple homes. By letting the bubble pop, the government could instantly create affordable housing for less affluent Chinese. – YaleGlobal Speculation, excess inventory, vacant developments, price reductions – a host of factors are set to undermine China’s real estate market and economic growth Patrick Chovanec Foreign Affairs, 26 December 2011 Rights:Copyright © 2002-2011 by the Council on Foreign Relations, Inc.

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China’s Real Estate Bubble May Have Just Popped

Thailand Business News –

This year’s floods have had a vast impact on the property market, with sectors affected across the board. But the impact varies from sector to sector,from residential to industrial.

Read the original here:
Floods Won’t Affect Thai Property Market in the Long Term
Thailand’s property sector is showing signs of an early recovery, as selective investors return to purchasing real estate stocks and actual property.

Some of the credit goes to a one-year government stimulus package that reduces the Special Business Tax from 3.3% to 0.11%, extends the reduction on transfer taxes from 2% to 0.01% and mortgage registration fees and provides a tax deduction on mortgage principal and interest.
Thailand’s property indicators show:

1.The Stock Exchange of Thailand (SET) index began rebounding in April 2009, and property stocks – while the first to fall in H2/08 – were amongst the first to recover
2. The Bank of Thailand (BoT) has lowered its policy interest rate four times since December 2008, prompting banks to reduce the minimum lending rate (MLR) from 7.25% to 6.25%
3. A continued drop in sales of durable goods due to uncertainty surrounding the economy is highlighted consumer confidence index (CCI) to a historic low of 72.8 in Q1/09 and New housing registrations in Bangkok and surrounding areas fell 43.8% in Q1/09

Recognising that sales would slow, forward-thinking companies took the opportunity to focus on their fundamentals and improve their balance sheets. This was the strategy of Hubert Viriot, CEO of the luxury developer Raimon Land, who was appointed in the midst of the crisis.

Second, Thailand’s banking system is much healthier than its Western counterparts. There are no toxic assets on local banks’ balance sheets. This benefits both the supply and demand side.

But a stable political environment in Thailand would likely see interest rates rise by half a percentage point. And oil prices will float at about US$85 to $95 a barrel. Construction costs will rise when oil prices and interest rates are in an upward trend. Overall housing supply has dropped over the past two years with a decrease in the number of construction permits. Many small-sized developers went bust after failing to access loans from local financial institutions.

Author: Shinji Takagi, Osaka University

Financial integration can be defined in several ways. But the only relevant definition, in the context of ongoing policy debate in Asia, is in terms of bilateral financial links analogous to the way trade integration is typically defined.

No other definition would highlight the asymmetry between trade and finance in Asia. Indeed, some economies are very open financially, and interest rates and equity prices may be highly correlated across some national borders. Despite this, bilateral financial links in the region are much more limited than bilateral trade links.

In 2009, Asia’s intraregional trade amounted to more than 50 per cent of global trade, compared to less than 35 per cent for foreign direct investment (FDI) and around 6 per cent for portfolio investment. Asia’s so-called market-driven economic integration, therefore, yielded a lopsided outcome. In one sense, this outcome is not surprising. Finance is little affected by distance, whereas for trade distance matters critically. Money should flow to a financial centre that offers the smallest intermediation costs and to a country that offers the highest risk-adjusted returns, regardless of the location.

Even so, regional financial integration remains an important unfinished agenda for Asia. Despite there being no theoretical case for preferring regional to global financial integration, promoting regional financial transactions will have its benefits. As the region integrates in trade and production, information is created through face-to-face contacts and the specifics of economic activities. Given the nature of asymmetric information that characterises financial transactions, such local information is more conducive to making regional financing deals than global ones. If markets and institutions are sufficiently developed, then there should be some ‘home bias’ within Asia favouring regional financial transactions. This should be the case even in situations where global transactions offer absolute advantage. The clear lack of home bias in Asia suggests that there are imperfections to be addressed as well as unmet financing needs.

In this respect there are insights to be gained from taking a close look at the cross-border financial links of Japan, the region’s largest creditor country. In 2009 Japan’s intraregional trade with Asia was more than 40 per cent of its total global trade. In contrast, Asia’s share in Japan’s financial transactions was only 24 per cent for FDI assets, and was even smaller, at less than 9 per cent, for FDI liabilities. The importance of Asia was almost negligible for portfolio investments: 8 per cent for equity assets, 1 per cent for debt assets and l.7 per cent for equity liabilities. The exception is Japan’s debt liabilities, where Asia accounted for 18 per cent at the end of 2009. This indicates that Asian investors are active participants in Japan’s large bond market. In terms of cross-border banking flows, Asia’s share was only 7 per cent, broadly similar to the share in total global cross-border bank claims. This suggests that Japanese banks differ little from other international banks in their lending behaviour towards Asia. In short, Japan’s financial links with Asia are much weaker than the links with North America and Europe, though Asia is by far the most important trading partner.

The pattern of investment activity points to a few possible factors to explain Asia’s lopsidedly small share in Japan’s financial transactions, and hence the lack of regional financial integration within Asia. First are the underdeveloped and small domestic capital markets. Second are the capital account restrictions that limit the scope for two-way capital flows. Third are the licensing and other regulatory practices that discriminate ex post against the cross-border activity of Asia-based banks.

Accordingly, in order to promote regional financial integration, the authorities of many of the region’s economies must develop their domestic capital markets further, and make them deep, liquid and efficient. They should also ease or remove controls on the ability of residents to invest abroad. And finally, they should relax the regulatory barriers on the entry of foreign banks, especially those from within the region. Because Asian financial systems remain largely bank-based, promoting this cross-border activity would be especially important.

Undoubtedly part of the limited financial integration we now observe in Asia is related to the stages of development of many of the economies. Regional financial integration is bound to deepen to a level more commensurate with trade integration as Asian economies grow, per capita incomes rise, and financial wealth is accumulated.

Even so, some of the identified gaps require remedial action by governments. This is likely to be a long process because it involves institution and capacity building. Regional cooperative efforts may be needed to safeguard the process of capital account liberalisation and to relax the licensing standards for Asia-based foreign banks. Similarly, regional cooperation may be useful in setting common standards for domestic capital markets and cross-border issues of financial products. In the long run, a region-wide consolidation of domestic capital markets may help create a market with the size, depth and liquidity that is sufficiently attractive to large international and regional investors.

Shinji Takagi is Professor of Economics at the Graduate School of Economics, Osaka University, Japan.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s global impact‘.

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See original here:
Asian financial integration: an unfinished agenda

Thailand Business News – Growth in the CBRE Asia Pacific Logistics Rental Index accelerated to 2.0% q-o-q in the third quarter compared to 1.4% q-o-q in the second quarter. This was largely due to the strong performance of key Greater China markets, where retailers competed to secure quality logistics space in prime areas in anticipation of peak retail consumption during the Lunar New Year in January. Logistics rents in the Pacific held firm, although some markets recorded significant fluctuations.

More here:
China and India drive Logistics Rental Growth in Asia Pacific
Thailand’s property sector is showing signs of an early recovery, as selective investors return to purchasing real estate stocks and actual property.

Some of the credit goes to a one-year government stimulus package that reduces the Special Business Tax from 3.3% to 0.11%, extends the reduction on transfer taxes from 2% to 0.01% and mortgage registration fees and provides a tax deduction on mortgage principal and interest.
Thailand’s property indicators show:

1.The Stock Exchange of Thailand (SET) index began rebounding in April 2009, and property stocks – while the first to fall in H2/08 – were amongst the first to recover
2. The Bank of Thailand (BoT) has lowered its policy interest rate four times since December 2008, prompting banks to reduce the minimum lending rate (MLR) from 7.25% to 6.25%
3. A continued drop in sales of durable goods due to uncertainty surrounding the economy is highlighted consumer confidence index (CCI) to a historic low of 72.8 in Q1/09 and New housing registrations in Bangkok and surrounding areas fell 43.8% in Q1/09

Thai property developers, despite being some of the first local companies to get hit by the global financial crisis, have shown resilience and delivered strong results for investors.

These cultural changes are evidenced in the type of housing recently launched. On the lower- to mid-end side, Supalai and LPN have launched projects in Ratchayothin and Ratchada with units ranging from 28 to 55 square meters and prices from 1.5-3 million baht, reflecting demand among single professionals and young families. On the higher end side, where prices are at or above 100,000 baht per sq m, the Sukhumvit and CBD areas remain the preferred location. The common point between all this? Easy access to BTS and MRT lines.

The tax breaks was initially introduced on March 2008, when the special business tax was reduced from 3% to 0.1%, and the transfer and mortgage fees cut from 2% and 1% respectively to 0.01%. These incentives were due to end on December 2, 2008, but have effectively been extended until the current May 30 deadline.

Author: Christopher Findlay, University of Adelaide

The way ahead in the European debt crisis appears to lie in refinancing the debt held by those countries whose sovereign bond spreads are widening and who are at risk of default: but who will pay?

There is some move to have the private sector contribute — with a new financial transactions tax just announced — and while the Germans are resisting, they will more than likely pay most of the cost. Germany, in particular, gained a great deal from the current euro zone arrangement, as its exports benefitted from a lower currency than might otherwise be expected. Now, if they want to sustain the structure as it is, it will cost them.

Refinancing comes with the expectation that recipient economies will also cut spending, which will subsequently build confidence about their ability to repay these debts in the longer term, and potentially reduce the moral hazard problem. But some have argued that this could well be a ‘death trap’. Spending cuts across Europe mean no strong external demand to help countries adjust while US growth also falters.

Another response would be to introduce reforms aimed at raising productivity and evening out competitiveness, as there are surprisingly high divergences among European economies in the quality of economic regulation. Labour market regulation in Portugal, for example, lowers productivity growth. Certain rules, such as those on layoffs and the provision of other services to workers, kick in at specific firm sizes, leading to a larger number of smaller and less productive firms, something which is also highly topical in Australia. Others have talked about how Italy needs a ‘change of regime’.

Though not much discussed by those focusing on the way ahead, micro reform would be the real way out of the crisis: a credible set of commitments might be valued by lenders. But in the current context, this may not work fast enough either. There are other suggestions for a response. The EU President, for example, is now calling for ‘economic union’, or an institutional set-up which would support tighter coordination of fiscal policy and presumably regulatory reform.

Greater fiscal discipline and micro reform measures should already be in play, and the financial market constraints associated with the adoption of the euro were supposed to be their key driver. That was a grand expectation. In fact, the availability of finance from the rest of the world (including East Asia), and the expectation of financiers that lending to EU governments was a good bet, actually reduced the pressure to implement any of this. In any case, the large-scale political reform that would be required to put such a package together is not likely to happen quickly enough either — or if they want to wait until it does, the Germans will be refinancing other people for a long time to come!

The crisis is therefore more likely to drive fragmentation than consolidation, given the timelines and the current situation. The question then arises of who could eventually leave the euro zone. It might seem obvious that the high debtor nations would pull out and go their own way. But Michael Pettis recently pointed out that this would risk a ‘downward currency spiral’ and that Europe might well learn from the Asian financial crisis, and the Korean experience in particular. He also refers to another discussion underway, which speculates that it could be the Germans and other northern European countries who pull out to create a new currency (mark II?) and leave the devalued euro to the southerners.

But whichever outcome eventuates, it will be an interesting scenario from the Asia Pacific’s viewpoint: the potential effects of Europe turning into a constellation of clubs, even overlapping for different purposes, would not be limited to those European countries alone — though France would have an interesting choice to make in such a scenario, and this is perhaps what the English always thought should and would happen.

It is clear now that the EU should have worked harder and sooner on real reform. Europe’s leaders should not have done this in a ‘one-size-fits-all’ manner, as it has not been effective. The current crisis is an important lesson for promoters of sophisticated Asian integration and also for those worried about two-speed structures in existing federations. And the lesson is: do not lose sight of the never-ending task of structural reform, expect diversity in responses across economies and keep productivity growth going.

Professor Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide.

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European debt crisis: European fragmentation?

Announcement of Bangkok Metropolitan Administration Subject : Announcement on Flooding Situation in Bangkok ———————– M.R.

Sukhumbhand Paribatra, the Governor of Bangkok, revealed that the general flooding in Bangkok is gravely concerned. Normally, the level of the Chao Phraya River is equivalent to the level of high tide with an inclusion of a constant of approximately 1.30 m.

Therefore with reference to the forecasted level of high tide for today the level at the River could be expected at 2.35 – 2.40 m. which is over the maximum height of the water barrier along the River. Yesterday the level hit the record with the expectation that today the level would be higher than yesterday.

Since high tides are expected at this week so the level of the River could definitely pose certain amount of problems. BMA, hence, instructs those residing along the River and all connecting passages of water from the River to pay extraordinary cautions to the situation and be prepared to move their valuable belongings including electrical outlets to safe locations. For those residing behind the barrier should also take extra precautions as well. It is anticipated that BMA would require more than 10 millions sand bags under this unfortunate circumstance to construct and further strengthen barrier as well as to provide special cares to several places of importance, i.e.

The Siriraj Hospital, the Royal Palaces including the other Palaces.

Thus far several canal and Khlong Prapa have returned to normalcy.

The Lak Si District has been cleared of the flood whereas the Don Mueang District still is being affected. Khlong Tawee Watana recorded a rising level of 12 cm. With more opening at the gate, Khlong Prem Prachakorn still recorded an increase of more than 5 cm. , however, the flood is pushed into Khlong Lad Prao. In coping with future consequences of the inundation, BMA has moved electrical control units of the sluice gates to higher and safe ground.

The Governor cleared the misunderstanding among the public that the District of Bang Plad had not pay adequate attentions resulting in heavy flooding in the area particularly Charan Sanit Wong Road last evening. As a matter of fact the District of Bang Plad has monitored the situation all along very closely but the damaged was done on an old wall of private properties which could only be accessed with difficulty.

So the news reports on this issue were very inaccurate.

The Governor referred to the attempts of BMA in protecting the area where Vibhavadi Road intersecting with Khlong Rangsit with the construction of sand bag barrier which now with  unfortunate could not stop influx of the flood. BMA therefore further attempts by constructing  new line of barriers at Khlong Song, Chandharubeksa Road, the Air Forces Headquarters and another connecting segment of the Vibhavadi Road to allow an access to the Flood Relief Operation Center.

The Governor admired and was pleased with the decision of the Prime Minister in keeping the Center at the present site even it has been threatening with the approach of the flood. Moreover, BMA in cooperation with the Department of Highways will today reinforce the existing barrier of the Sai Mai Road. Rom Klao Road, and King Khaew Road of which some spots need to be reinforced to attain the height of 3.00 m. M.R.

Sukhumbhand Paribatra stressed that since the beginning of the mishap all personnel of BMA have worked very hard and put the most of their efforts to relief the hardship of people of Bangkok with strong determination and intention of lessening burdens being experienced by the people. But it is very discouraging and detrimental to the devotion of the BMA personnel when their efforts and operations are hampered by certain groups of people. It could be very well understood if the opposing to the operations, i.e. construction and reinforcement of barriers, control of flood via opening of sluice gates to certain extents, etc., are well intended and supported with rational. However, if those opposing based on personal rational and political as well as impartial opinions, the Governor believes that general public would not be able to accept those opposing.

Therefore, at this critical moment amidst unfortunate circumstances general public should be cooperative and provide lending efforts to BMA and also other government agencies.  BMA will apply all efforts in providing supports to its personnel.

Those affected by the inundation and strive to report to work have always been admired and praised, meanwhile those affected and not report to works will not be recorded as absentees.

Time : 11.00 a.m.

See the original post here:
OFFICIAL: Announcement on Flooding Situation in Bangkok, 25 Oct,2011

Financial stocks, led by HDFC Bank, on Monday dropped by as much as 7 per cent on the BSE after the Reserve Bank raised its lending rates by 25 basis points to tame inflation.

The rest is here:
Banks suffer most as rate sensitive stocks dip