China's Manufacturing Activity Picks Up in May:
China's official purchasing managers' index (PMI) rose to 50.8 in May from 50.6 in April, an official survey showed on Saturday, indicating a slight pick-up in China's manufacturing activity.
The PMI reading, published by the National Bureau of Statistics, was stronger than market expectations of 50.1 in a Reuters poll.
A reading above 50 indicates expanding activity while a reading below that level points to a contraction.
(Read More: China Stocks Are May's Best Performers)
A sub-index measuring new orders inched up to 51.8 in May from 51.7 in April, indicating stronger demand for Chinese goods.
A PMI survey sponsored by HSBC, which focuses more on small- and medium-sized firms in the private sector as compared with the official one, is scheduled to be published on Monday.
Its preliminary May reading, published last week, fell to 49.6, slipping under the 50-point level for the first time since October as new orders shrank.
'via Blog this'
Friday, May 31, 2013
Bond Sell-Off: Two Brokerages Face Off
Bond Sell-Off: Two Brokerages Face Off:
"In our opinion, the market has overreacted," countered UBS in a note from its analysts.
Central to both opinions is the guessing game surrounding the Federal Reserve's bond buying through its so-called quantitative easing program (QE3). As the economy improves and the need for the program wanes, the Fed is expected to "taper" off the bond buying. When that happens, or when the market collectively thinks it is about to happen, bond prices are expected to generally sink as a major buyer leaves the market.
Recent comments from Fed officials, and testimony from Fed Chairman Ben Bernanke in particular, led to slight drop in Treasury bond prices and a rise in their corresponding yields recently.
"We were surprised by the Treasury sell-off last week in response to the various Fed speakers. Chairman Bernanke's testimony to the Joint Economic Committee seems particularly even handed," the UBS analysts declared in the note. "…Sure, the Fed could taper in the next couple of months, but it still seems very unlikely."
Indeed, UBS argued that the 10-year Treasury note, currently trading at a yield of around 2.17 percent, is roughly 50 basis points over-valued.
To use an old cliché and state the obvious, only time will tell who's right. And while it's entertaining to watch the face off, it's important to remember the debate is critical to bond market investors. If you own bonds right now, mistiming when they might decline in value could cost you a lot of money.
'via Blog this'
"In our opinion, the market has overreacted," countered UBS in a note from its analysts.
Central to both opinions is the guessing game surrounding the Federal Reserve's bond buying through its so-called quantitative easing program (QE3). As the economy improves and the need for the program wanes, the Fed is expected to "taper" off the bond buying. When that happens, or when the market collectively thinks it is about to happen, bond prices are expected to generally sink as a major buyer leaves the market.
Recent comments from Fed officials, and testimony from Fed Chairman Ben Bernanke in particular, led to slight drop in Treasury bond prices and a rise in their corresponding yields recently.
"We were surprised by the Treasury sell-off last week in response to the various Fed speakers. Chairman Bernanke's testimony to the Joint Economic Committee seems particularly even handed," the UBS analysts declared in the note. "…Sure, the Fed could taper in the next couple of months, but it still seems very unlikely."
Indeed, UBS argued that the 10-year Treasury note, currently trading at a yield of around 2.17 percent, is roughly 50 basis points over-valued.
To use an old cliché and state the obvious, only time will tell who's right. And while it's entertaining to watch the face off, it's important to remember the debate is critical to bond market investors. If you own bonds right now, mistiming when they might decline in value could cost you a lot of money.
'via Blog this'
Bond Sell-Off: Two Brokerages Face Off
Bond Sell-Off: Two Brokerages Face Off: "Two major brokerages are taking opposite sides over whether or not a long awaited sell off in the bond market is here.
"The bond sell-off: It's for real," Goldman Sach's fixed income analysts said in a research note released on Friday, pointing to a recent uptick in Treasury yields."
"In our opinion, the market has overreacted," countered UBS in a note from its analysts.
Central to both opinions is the guessing game surrounding the Federal Reserve's bond buying through its so-called quantitative easing program (QE3). As the economy improves and the need for the program wanes, the Fed is expected to "taper" off the bond buying. When that happens, or when the market collectively thinks it is about to happen, bond prices are expected to generally sink as a major buyer leaves the market.
Recent comments from Fed officials, and testimony from Fed Chairman Ben Bernanke in particular, led to slight drop in Treasury bond prices and a rise in their corresponding yields recently.
'via Blog this'
"The bond sell-off: It's for real," Goldman Sach's fixed income analysts said in a research note released on Friday, pointing to a recent uptick in Treasury yields."
"In our opinion, the market has overreacted," countered UBS in a note from its analysts.
Central to both opinions is the guessing game surrounding the Federal Reserve's bond buying through its so-called quantitative easing program (QE3). As the economy improves and the need for the program wanes, the Fed is expected to "taper" off the bond buying. When that happens, or when the market collectively thinks it is about to happen, bond prices are expected to generally sink as a major buyer leaves the market.
Recent comments from Fed officials, and testimony from Fed Chairman Ben Bernanke in particular, led to slight drop in Treasury bond prices and a rise in their corresponding yields recently.
"We were surprised by the Treasury sell-off last week in response to the various Fed speakers. Chairman Bernanke's testimony to the Joint Economic Committee seems particularly even handed," the UBS analysts declared in the note. "…Sure, the Fed could taper in the next couple of months, but it still seems very unlikely."
Indeed, UBS argued that the 10-year Treasury note, currently trading at a yield of around 2.17 percent, is roughly 50 basis points over-valued.
To use an old cliché and state the obvious, only time will tell who's right. And while it's entertaining to watch the face off, it's important to remember the debate is critical to bond market investors. If you own bonds right now, mistiming when they might decline in value could cost you a lot of money.
'via Blog this'
The 'Great Rotation'—Is It Finally Happening?
The 'Great Rotation'—Is It Finally Happening?: ""We've been waiting for the great rotation out of fixed income, we've been saying it all along, everything we see in fixed income is all risk and no return - people are starting to wake up," Jack Bouroudjian, CEO of wealth management firm Bull and Bear Partners said on CNBC Asia's "Squawk Box" on Wednesday.
Investors are starting to realize the big difference between the Fed "tapering" and "tightening" its easing policy, according to Bouroudjian, who says tapering is much different than draining liquidity out of the market, which is years away.
"I think they're [investors] coming back to their senses, which is one of the reasons we're seeing that great rotation - these large asset allocations out of fixed income into equities - look for that to continue going into the rest of the year," Bouroudjian said."
'via Blog this'
Investors are starting to realize the big difference between the Fed "tapering" and "tightening" its easing policy, according to Bouroudjian, who says tapering is much different than draining liquidity out of the market, which is years away.
"I think they're [investors] coming back to their senses, which is one of the reasons we're seeing that great rotation - these large asset allocations out of fixed income into equities - look for that to continue going into the rest of the year," Bouroudjian said."
'via Blog this'
Dow 28,000 Possible in 6 Years: BlackRock's Fink
Dow 28,000 Possible in 6 Years: BlackRock's Fink: ""I believe the fixed income market is going to respond with higher rates, but not arguably very high rates," Fink predicted. "That's still supporting an equity market."
"The Federal Reserve may still take its foot off the pedal and we can debate when that will be—whether it's in September," he continued, "I actually believe it will be later."
"The [Fed] chairman also said he's focused on employment, He's not focusing on data. And the data is actually mixed. You have consumer confidence much higher, but you have manufacturing data slowing down."
"The economy is not at full throttle," he explained, but it feels better than it is because consumer confidence is rising."
'via Blog this'
"The Federal Reserve may still take its foot off the pedal and we can debate when that will be—whether it's in September," he continued, "I actually believe it will be later."
"The [Fed] chairman also said he's focused on employment, He's not focusing on data. And the data is actually mixed. You have consumer confidence much higher, but you have manufacturing data slowing down."
"The economy is not at full throttle," he explained, but it feels better than it is because consumer confidence is rising."
'via Blog this'
Thursday, May 30, 2013
Why the IMF Might Be Wrong on China
Why the IMF Might Be Wrong on China: ""Is the IMF's advice the right one? It's almost like the IMF is asking China to do a global duty, but at the moment there's a lot of debate on getting the right kind of growth," Chong Yoon Chou, investment director at Aberdeen Asset Management, told CNBC Asia's "Cash Flow."
"It's not about the number, but the type of growth that they [China's policymakers] want. It's not about building highways and airports as in the past, it's about developing consumer spending and other parts of the economy," he added, referring to a drive by Beijing to rebalance its economy away from investment and exports to consumption and the services sector."
'via Blog this'
"It's not about the number, but the type of growth that they [China's policymakers] want. It's not about building highways and airports as in the past, it's about developing consumer spending and other parts of the economy," he added, referring to a drive by Beijing to rebalance its economy away from investment and exports to consumption and the services sector."
'via Blog this'
Surprise! China Stocks Are May's Best Performers
Surprise! China Stocks Are May's Best Performers: "There's no fundamental news that has pushed this, literally in the first four months of the year, it was a structural underperformer," Krake said. "So, is it a short squeeze? [Referring to sellers being forced to close short positions as the market bounces higher] There's not been any policy response.""
'via Blog this'
'via Blog this'
Is Sony 'Un-Japanese' Enough to Entertain Change?
Is Sony 'Un-Japanese' Enough to Entertain Change?: ""When I look at Japan, I struggle to find large caps with attractive business models," he said, though he noted that Central Japan Railways, which operates the country's most lucrative bullet train lines, could be a "phenomenal" company if management could be persuaded to raise prices and ditch plans to spend $50 billion on a high-speed magnetic levitation rail line from Tokyo to Osaka in western Japan."
The American way of focusing on efficiency is not the only way to raise profits," Atsushi Osanai, associate professor at Waseda Business School, told Reuters Insider television. Osanai worked at Sony from 1997 to 2007. "Japanese companies are not very efficient, but they make very good products and have the ability to create new things. That's more valuable on the long-term scale.
Loeb needs to convince other Sony shareholders that selling part of the entertainment business would both generate cash to help the struggling maker of Bravia TVs and Vaio laptops and improve profitability at Sony Entertainment, which would remain under Sony's control."Westernized companies are in the minority among large caps, for sure. Boards tend to focus on stakeholder management at the expense of shareholder value," said Oscar Veldhuijzen, a London-based fund manager at The Children's Investment Fund Management (UK) LLP. "The background of activism is very negative as it used to be a sort of Mafioso involved with a very different type of activism involving a lot of violence."Sony earns two-thirds of its revenue overseas and, for corporate Japan, appears more westernized. Hirai, who spent most of his childhood in the United States, was picked by former CEO Howard Stringer, a Welshman, in part for his ability to be both a Japanese boss in Sony's domestic electronics hub and a western CEO in the U.S.-centered entertainment business.'via Blog this'
The American way of focusing on efficiency is not the only way to raise profits," Atsushi Osanai, associate professor at Waseda Business School, told Reuters Insider television. Osanai worked at Sony from 1997 to 2007. "Japanese companies are not very efficient, but they make very good products and have the ability to create new things. That's more valuable on the long-term scale.
Loeb needs to convince other Sony shareholders that selling part of the entertainment business would both generate cash to help the struggling maker of Bravia TVs and Vaio laptops and improve profitability at Sony Entertainment, which would remain under Sony's control."Westernized companies are in the minority among large caps, for sure. Boards tend to focus on stakeholder management at the expense of shareholder value," said Oscar Veldhuijzen, a London-based fund manager at The Children's Investment Fund Management (UK) LLP. "The background of activism is very negative as it used to be a sort of Mafioso involved with a very different type of activism involving a lot of violence."Sony earns two-thirds of its revenue overseas and, for corporate Japan, appears more westernized. Hirai, who spent most of his childhood in the United States, was picked by former CEO Howard Stringer, a Welshman, in part for his ability to be both a Japanese boss in Sony's domestic electronics hub and a western CEO in the U.S.-centered entertainment business.'via Blog this'
Sony Gaming Seeks a Power Surge From Social Media
Sony Gaming Seeks a Power Surge From Social Media: ""The PS4 is the most powerful machine ever created, consumers are chomping at the bit to get it and the good news is it will be there for holiday 2013, so if it's on your Christmas list, there's a good chance you'll be able to get it."
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin"
'via Blog this'
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin"
'via Blog this'
American Investor Targets Sony for a Breakup
American Investor Targets Sony for a Breakup:
Mr. Loeb's campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as prime minister has promoted policies meant to attract private investment. Mr. Loeb is betting that Mr. Abe will expand deregulation.
"Under Prime Minister Abe's leadership, Japan can regain its position as one of the world's pre-eminent economic powerhouses and manufacturing engines," the hedge fund manager wrote in his letter.
Despite its decade-long slump, Sony, the 67-year-old electronics pioneer, remains one of the most prominent companies in Japan, with a market value of roughly $18 billion.
Still, Mr. Loeb has plenty of ammunition. Shares of Sony have plunged nearly 85 percent over the last 13 years. The company long ago ceded its crown as the king of cool electronics to Apple, and its dominance in televisions was eroded by the emergence of Korean rivals like Samsung and LG.
Last week, Sony reported its first annual profit in five years. But it reached that milestone thanks largely to the weakening yen and some belt-tightening, including the consolidation of businesses and the sale of its American headquarters.
Sony's chief executive, Mr. Hirai, is scheduled to make a presentation about the company's turnaround plan next week. He has argued that despite having come late to the era of digital media, the company that made the Walkman, the Trinitron television and the PlayStation can rebound.
To Mr. Loeb, more must be done, starting with the spinoff of Sony Entertainment. Though the division accounts for more than 40 percent of the company's enterprise value, he said in his letter that it needed discipline to raise its profit margins. Mr. Loeb estimated that a partial spinoff of the entertainment business could bolster Sony's share price by as much as 60 percent.
"Third Point would not have made this substantial investment if we did not believe in a bright future for Sony's global brand, superior technology, and dedicated employees," he wrote. "We are confident that by acting as partners, Sony will grow stronger."
The letter sent from Third Point to the Sony Corporation is available as a downloadable PDF document by clicking here.
'via Blog this'
Mr. Loeb's campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as prime minister has promoted policies meant to attract private investment. Mr. Loeb is betting that Mr. Abe will expand deregulation.
"Under Prime Minister Abe's leadership, Japan can regain its position as one of the world's pre-eminent economic powerhouses and manufacturing engines," the hedge fund manager wrote in his letter.
Despite its decade-long slump, Sony, the 67-year-old electronics pioneer, remains one of the most prominent companies in Japan, with a market value of roughly $18 billion.
Still, Mr. Loeb has plenty of ammunition. Shares of Sony have plunged nearly 85 percent over the last 13 years. The company long ago ceded its crown as the king of cool electronics to Apple, and its dominance in televisions was eroded by the emergence of Korean rivals like Samsung and LG.
Last week, Sony reported its first annual profit in five years. But it reached that milestone thanks largely to the weakening yen and some belt-tightening, including the consolidation of businesses and the sale of its American headquarters.
Sony's chief executive, Mr. Hirai, is scheduled to make a presentation about the company's turnaround plan next week. He has argued that despite having come late to the era of digital media, the company that made the Walkman, the Trinitron television and the PlayStation can rebound.
To Mr. Loeb, more must be done, starting with the spinoff of Sony Entertainment. Though the division accounts for more than 40 percent of the company's enterprise value, he said in his letter that it needed discipline to raise its profit margins. Mr. Loeb estimated that a partial spinoff of the entertainment business could bolster Sony's share price by as much as 60 percent.
"Third Point would not have made this substantial investment if we did not believe in a bright future for Sony's global brand, superior technology, and dedicated employees," he wrote. "We are confident that by acting as partners, Sony will grow stronger."
The letter sent from Third Point to the Sony Corporation is available as a downloadable PDF document by clicking here.
'via Blog this'
Hedge Fund Billionaire Loeb: Sony Reminds Me of Yahoo
Hedge Fund Billionaire Loeb: Sony Reminds Me of Yahoo:
Loeb's Third Point hedge fund has built up a $1.1 billion stake in Sony, making it the Japanese group's biggest shareholder, and Loeb said on Tuesday he was pushing Sony to sell up to a fifth of its profitable music and movie business in a move he says would help turn around its struggling electronics business.
"I rely a lot on my experience and pattern recognition. The Sony situation reminded me a lot of Yahoo," Loeb said in an interview with Reuters in Tokyo on Wednesday.
In the case of Yahoo, Loeb began pushing the company in 2011 to go back to basics to compete against the likes of Google and Facebook. Just as Yahoo struggled to adapt to developments like social networking and mobile computing, Sony has been overtaken by nimbler consumer electronic rivals such as Samsung Electronics and Apple.
Although Sony Entertainment, which includes artists like Beyonce and Adele and hit franchises like "Spider-Man", brought in 37 percent of the company's operating profit in the year to end-March, it still lags the rest of the industry, Loeb said.
"Their margins are the lowest in the industry," he noted. "We think it could be a lot more disciplined."
Sharper Focus
Loeb, 51, also takes issue with the idea that Sony benefits from having both hardware and content, a core tenet of the Japanese firm's strategy going back to the 1980s when it dominated the market for portable entertainment with its Walkman cassette players.
"It's all been theoretical," Loeb said. "There has been no monetization of that relationship."
Loeb has said he would be happy to take a seat on Sony's board and - unlike his attack on Yahoo's leadership, which led to the dismissal of CEO Scott Thompson and the hiring of Google veteran Marissa Mayer - he praised Sony CEO Kazuo Hirai for the steps he has taken since taking the job in April 2012.
But Loeb has also said Sony needs to sharpen its focus and pull back from commoditised products like semiconductors where it lacks scale to streamline its offerings.
"I think Mr. Hirai is doing many of the right things. And he says Sony must change, Sony will change. In his words there is some sense of urgency," Loeb said. "I also think he brings western sensibility to management."
Loeb's call for a shake-up at Sony gave fresh momentum for a rally in its shares. Sony stock closed up more than 10 percent on Wednesday in Tokyo at a near 23-month high. The shares have more than doubled in value since late December as the yen has weakened and foreign investors returned to Japanese stocks.
Loeb said he shares a widespread bullishness on Japan because of the monetary and fiscal stimulus policies and promises of structural reform that have been central to Prime Minister Shinzo Abe's new administration.
"Things are happening quickly in Japan with 'Abenomics'," he said. "I think what we are trying to do is very consistent with the structural reform that has to happen for Japan."
He added: "We wouldn't be here if we didn't think there was a tailwind from the economic policies in Japan. In the case of Sony, it is very important they have the wind at their back economically."
Core Business
Third Point's holding of Sony shares makes up less than half of the fund's holdings in Japan, Loeb said, indicating the hedge funds' portfolio of Japanese stocks could be worth around $3 billion or more. He declined to comment on the average price at which the fund acquired Sony shares. Through direct ownership and swap agreements, the $13 billion New York-based hedge fund has about 6.3 percent of Sony's shares.
Sony executives have said repeatedly they see entertainment as core to the company's business. In a statement on Tuesday, Sony said its entertainment assets were "not for sale," but left open the door for more discussions with Loeb as part of a "constructive dialogue with our shareholders."
For now, Third Point wants to see how Sony's board responds to its proposal to spin off its entertainment arm through an initial public offering and whether it hires investment advisers to assess the merits of that idea, a person familiar with the hedge fund's strategy said.
But Loeb could turn more aggressive, as he did with Yahoo, if the Sony board fails to take action. He would have the right to call for an extraordinary stockholder meeting six months after he acquired more than 3 percent of Sony shares.
Yahoo shares have almost doubled in the past 12 months
'via Blog this'
Loeb's Third Point hedge fund has built up a $1.1 billion stake in Sony, making it the Japanese group's biggest shareholder, and Loeb said on Tuesday he was pushing Sony to sell up to a fifth of its profitable music and movie business in a move he says would help turn around its struggling electronics business.
"I rely a lot on my experience and pattern recognition. The Sony situation reminded me a lot of Yahoo," Loeb said in an interview with Reuters in Tokyo on Wednesday.
In the case of Yahoo, Loeb began pushing the company in 2011 to go back to basics to compete against the likes of Google and Facebook. Just as Yahoo struggled to adapt to developments like social networking and mobile computing, Sony has been overtaken by nimbler consumer electronic rivals such as Samsung Electronics and Apple.
Although Sony Entertainment, which includes artists like Beyonce and Adele and hit franchises like "Spider-Man", brought in 37 percent of the company's operating profit in the year to end-March, it still lags the rest of the industry, Loeb said.
"Their margins are the lowest in the industry," he noted. "We think it could be a lot more disciplined."
Sharper Focus
Loeb, 51, also takes issue with the idea that Sony benefits from having both hardware and content, a core tenet of the Japanese firm's strategy going back to the 1980s when it dominated the market for portable entertainment with its Walkman cassette players.
"It's all been theoretical," Loeb said. "There has been no monetization of that relationship."
Loeb has said he would be happy to take a seat on Sony's board and - unlike his attack on Yahoo's leadership, which led to the dismissal of CEO Scott Thompson and the hiring of Google veteran Marissa Mayer - he praised Sony CEO Kazuo Hirai for the steps he has taken since taking the job in April 2012.
But Loeb has also said Sony needs to sharpen its focus and pull back from commoditised products like semiconductors where it lacks scale to streamline its offerings.
"I think Mr. Hirai is doing many of the right things. And he says Sony must change, Sony will change. In his words there is some sense of urgency," Loeb said. "I also think he brings western sensibility to management."
Loeb's call for a shake-up at Sony gave fresh momentum for a rally in its shares. Sony stock closed up more than 10 percent on Wednesday in Tokyo at a near 23-month high. The shares have more than doubled in value since late December as the yen has weakened and foreign investors returned to Japanese stocks.
Loeb said he shares a widespread bullishness on Japan because of the monetary and fiscal stimulus policies and promises of structural reform that have been central to Prime Minister Shinzo Abe's new administration.
"Things are happening quickly in Japan with 'Abenomics'," he said. "I think what we are trying to do is very consistent with the structural reform that has to happen for Japan."
He added: "We wouldn't be here if we didn't think there was a tailwind from the economic policies in Japan. In the case of Sony, it is very important they have the wind at their back economically."
Core Business
Third Point's holding of Sony shares makes up less than half of the fund's holdings in Japan, Loeb said, indicating the hedge funds' portfolio of Japanese stocks could be worth around $3 billion or more. He declined to comment on the average price at which the fund acquired Sony shares. Through direct ownership and swap agreements, the $13 billion New York-based hedge fund has about 6.3 percent of Sony's shares.
Sony executives have said repeatedly they see entertainment as core to the company's business. In a statement on Tuesday, Sony said its entertainment assets were "not for sale," but left open the door for more discussions with Loeb as part of a "constructive dialogue with our shareholders."
For now, Third Point wants to see how Sony's board responds to its proposal to spin off its entertainment arm through an initial public offering and whether it hires investment advisers to assess the merits of that idea, a person familiar with the hedge fund's strategy said.
But Loeb could turn more aggressive, as he did with Yahoo, if the Sony board fails to take action. He would have the right to call for an extraordinary stockholder meeting six months after he acquired more than 3 percent of Sony shares.
Yahoo shares have almost doubled in the past 12 months
'via Blog this'
Sony Board Will Review Loeb Spinoff Proposal: CEO
Sony Board Will Review Loeb Spinoff Proposal: CEO:
It's important that the Sony board examine activist investor Dan Loeb's proposal to spin off part of the entertainment business and it's premature to speculate on what will happen, CEO Kazuo Hirai told CNBC's "Closing Bell" on Thursday.
"The proposal is that we look to spin off 15 percent to 20 percent of our entertainment assets," Hirai said. "The process is a discussion that needs to happen at the board level of the organization. We want to make sure we have a thorough discussion of the merits of the proposal before we come to any conclusion."
The most important priority, Hirai said, is that Sony makes sure it is able to "continue a very successful business in the entertainment space." Part of that is leveraging the entertainment business' content to support the electronics business, he said. "That's a combination that other electronics manufacturers do not have."
Earlier this month, Loeb took a $1.1 billion stake in Sony to agitate for the conglomerate to consider a spinoff of the entertainment business. Loeb's Third Point hedge fund is Sony's largest shareholder.
Hirai added that Sony wants to make sure it looks to outside advisors to assist in objectively looking at the proposal and that it is getting advice on all aspects of the proposal.
(Read More: Hedge Fund Billionaire Loeb: Sony Reminds Me of Yahoo)
Turning to the electronics business, Hirai said Sony can turn that business around through "focus and execution."
Sony has a new smartphone product coming, for instance, Hirai said, that it designed from the ground up after dissolving the joint venture with Ericsson last year. He said it's packed with the best of Sony technology.
And with the company's new PlayStation 4 going up against Microsoft's new XBox One this holiday season, the Sony CEO said, "We want to make sure we have the best and most compelling games." He added, "This generation of software and hardware is going to include a lot of social aspects and mobile aspects as well."
Hirai also said the Japanese government is pushing the right agendas, but it's too early to tell if Abenomics will work.
"It's not going to be an overnight change but I think we're heading in the right direction," he said, adding that the government needs to stick to its policies and make sure real growth opportunities for Japanese industry take hold.
_ By CNBC's Justin Menza. Follow him on Twitter @JustinMenza.
'via Blog this'
It's important that the Sony board examine activist investor Dan Loeb's proposal to spin off part of the entertainment business and it's premature to speculate on what will happen, CEO Kazuo Hirai told CNBC's "Closing Bell" on Thursday.
"The proposal is that we look to spin off 15 percent to 20 percent of our entertainment assets," Hirai said. "The process is a discussion that needs to happen at the board level of the organization. We want to make sure we have a thorough discussion of the merits of the proposal before we come to any conclusion."
The most important priority, Hirai said, is that Sony makes sure it is able to "continue a very successful business in the entertainment space." Part of that is leveraging the entertainment business' content to support the electronics business, he said. "That's a combination that other electronics manufacturers do not have."
Earlier this month, Loeb took a $1.1 billion stake in Sony to agitate for the conglomerate to consider a spinoff of the entertainment business. Loeb's Third Point hedge fund is Sony's largest shareholder.
Hirai added that Sony wants to make sure it looks to outside advisors to assist in objectively looking at the proposal and that it is getting advice on all aspects of the proposal.
(Read More: Hedge Fund Billionaire Loeb: Sony Reminds Me of Yahoo)
Turning to the electronics business, Hirai said Sony can turn that business around through "focus and execution."
Sony has a new smartphone product coming, for instance, Hirai said, that it designed from the ground up after dissolving the joint venture with Ericsson last year. He said it's packed with the best of Sony technology.
And with the company's new PlayStation 4 going up against Microsoft's new XBox One this holiday season, the Sony CEO said, "We want to make sure we have the best and most compelling games." He added, "This generation of software and hardware is going to include a lot of social aspects and mobile aspects as well."
Hirai also said the Japanese government is pushing the right agendas, but it's too early to tell if Abenomics will work.
"It's not going to be an overnight change but I think we're heading in the right direction," he said, adding that the government needs to stick to its policies and make sure real growth opportunities for Japanese industry take hold.
_ By CNBC's Justin Menza. Follow him on Twitter @JustinMenza.
'via Blog this'
Wednesday, May 29, 2013
Sony Adds Former Apple Executives as Hirai Targets Mobile - Bloomberg
Sony Adds Former Apple Executives as Hirai Targets Mobile - Bloomberg: "Sony Corp. (6758) Chief Executive Officer Kazuo Hirai is trying to win back customers from Apple Inc. (AAPL) with new Xperia smartphones. Adding two former executives of the iPhone maker to Sony’s board next month may help.
Eikoh Harada, who spent seven years as head of Apple in Japan, and Tim Schaaff, who worked for the iPad maker until 2005, are nominated to become directors at Sony’s annual shareholder meeting on June 20"
Hirai cut jobs and sold assets to help the Tokyo-based company post its first annual profit in five years as consumers once drawn to Walkmans and Bravia televisions now flock to products from Apple and Samsung Electronics Co. (005930) Winning customers with Xperia handsets is key to his plan to revive Sony’s unprofitable electronics operations by bringing what he called “inspiration” to its hardware.
“It would help Sony to gain outside board members that have expertise in businesses that Sony is trying to strengthen,” said Koki Shiraishi, an analyst at SMBC Nikko Securities Inc. “It is common for a company to approach people with experience at a growth company.”
Sony nominated three directors to its board for approval by shareholders next month, replacing four that will retire, including board Chairman and former CEO Howard Stringer.
The third nominee, Joichi Ito, is a director of the Media Lab at Massachusetts Institute of Technology and also the New York Times Co.
Apple Sales
The additions to the board come as existing directors discuss whether to adopt billionaire hedge-fund manager Daniel Loeb’s proposal for an initial public offering of Sony’s entertainment business that includes a Hollywood movie studio and music operations. Talks on the plan from Loeb’s Third Point LLC, a Sony shareholder, are at an early stage and “it’s important that the board will discuss this and come to a decision that represents Sony’s stance,” Hirai said May 22.
Sony has jumped 10 percent since Loeb told Hirai that partially spinning off the entertainment assets would bring a higher valuation and raise cash for the company, whose movie studio topped the U.S. box office last year with hits including “Skyfall.” Film and financial services earnings have helped the company counter nine straight annual losses from making TVs.
While Sony’s smartphone unit is expecting 27 percent growth in shipments this year, it remains dwarfed by Cupertino, California-based Apple’s sales.
The Japanese company expects handset sales of 42 million units in the year ending March 31. Apple sold almost 48 million iPhones in the December quarter alone, according to data compiled by Bloomberg.
McDonalds Japan
Sony’s market share in the worldwide smartphone industry rose to 3.8 percent in the first quarter of 2013 from 3.6 percent a year earlier, according to data compiled by Bloomberg. Samsung and Apple together controlled 49 percent of sales.
Harada worked for Apple for 14 years, leaving in 2004 after spending his final seven years there as head of Japanese operations.
After leaving Apple, Harada joined McDonald’s Holdings Co. (Japan) as CEO to revamp the Japanese operations of the world’s largest hamburger chain. He shut about 600 unprofitable or small restaurants, upgraded the menu and lured customers through partnerships with NTT DoCoMo Inc. (9437) and Nintendo Co. (7974) for online services at outlets.
Harada’s expertise and successful career at Apple, and his experience in businesses that face consumers directly, were some of the reasons he was nominated, Hirai told reporters at a May 22 briefing. Schaaff’s experience in Silicon Valley can help Sony as the electronics maker increasingly focuses on expanding network businesses, he said.
‘Chase Apple’
Schaaff joined Sony in 2005 from Apple, where he held positions including vice president of Interactive Media, according to the Japanese electronics maker. His contributions at Apple included managing the development and maintenance of the QuickTime platform, Sony said when he joined the company.
“I doubt Sony can catch up with Apple after all this time, it may be better to gain talents from a totally different field,” said Yuuki Sakurai, president of Fukoku Capital Management Inc. in Tokyo. “It’s hard to say whether these nominees will help Sony as it’s not very clear to investors where the company is heading.”
Schaaff stepped down as president of Sony Network Entertainment, the company’s online service, last year after attacks from computer hackers compromised customer information.
Ito is a co-founder of Digital Garage Inc. (4819), a Japanese online service company whose alliance partners include Twitter Inc.
Digital Garage also has a stake in Facebook Inc. (FB) through its investment arm. Akari Fukuda, a spokeswoman for Tokyo-based Digital Garage, declined to elaborate on the investments.
To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
'via Blog this'
Eikoh Harada, who spent seven years as head of Apple in Japan, and Tim Schaaff, who worked for the iPad maker until 2005, are nominated to become directors at Sony’s annual shareholder meeting on June 20"
Hirai cut jobs and sold assets to help the Tokyo-based company post its first annual profit in five years as consumers once drawn to Walkmans and Bravia televisions now flock to products from Apple and Samsung Electronics Co. (005930) Winning customers with Xperia handsets is key to his plan to revive Sony’s unprofitable electronics operations by bringing what he called “inspiration” to its hardware.
“It would help Sony to gain outside board members that have expertise in businesses that Sony is trying to strengthen,” said Koki Shiraishi, an analyst at SMBC Nikko Securities Inc. “It is common for a company to approach people with experience at a growth company.”
Sony nominated three directors to its board for approval by shareholders next month, replacing four that will retire, including board Chairman and former CEO Howard Stringer.
The third nominee, Joichi Ito, is a director of the Media Lab at Massachusetts Institute of Technology and also the New York Times Co.
Apple Sales
The additions to the board come as existing directors discuss whether to adopt billionaire hedge-fund manager Daniel Loeb’s proposal for an initial public offering of Sony’s entertainment business that includes a Hollywood movie studio and music operations. Talks on the plan from Loeb’s Third Point LLC, a Sony shareholder, are at an early stage and “it’s important that the board will discuss this and come to a decision that represents Sony’s stance,” Hirai said May 22.
Sony has jumped 10 percent since Loeb told Hirai that partially spinning off the entertainment assets would bring a higher valuation and raise cash for the company, whose movie studio topped the U.S. box office last year with hits including “Skyfall.” Film and financial services earnings have helped the company counter nine straight annual losses from making TVs.
While Sony’s smartphone unit is expecting 27 percent growth in shipments this year, it remains dwarfed by Cupertino, California-based Apple’s sales.
The Japanese company expects handset sales of 42 million units in the year ending March 31. Apple sold almost 48 million iPhones in the December quarter alone, according to data compiled by Bloomberg.
McDonalds Japan
Sony’s market share in the worldwide smartphone industry rose to 3.8 percent in the first quarter of 2013 from 3.6 percent a year earlier, according to data compiled by Bloomberg. Samsung and Apple together controlled 49 percent of sales.
Harada worked for Apple for 14 years, leaving in 2004 after spending his final seven years there as head of Japanese operations.
After leaving Apple, Harada joined McDonald’s Holdings Co. (Japan) as CEO to revamp the Japanese operations of the world’s largest hamburger chain. He shut about 600 unprofitable or small restaurants, upgraded the menu and lured customers through partnerships with NTT DoCoMo Inc. (9437) and Nintendo Co. (7974) for online services at outlets.
Harada’s expertise and successful career at Apple, and his experience in businesses that face consumers directly, were some of the reasons he was nominated, Hirai told reporters at a May 22 briefing. Schaaff’s experience in Silicon Valley can help Sony as the electronics maker increasingly focuses on expanding network businesses, he said.
‘Chase Apple’
Schaaff joined Sony in 2005 from Apple, where he held positions including vice president of Interactive Media, according to the Japanese electronics maker. His contributions at Apple included managing the development and maintenance of the QuickTime platform, Sony said when he joined the company.
“I doubt Sony can catch up with Apple after all this time, it may be better to gain talents from a totally different field,” said Yuuki Sakurai, president of Fukoku Capital Management Inc. in Tokyo. “It’s hard to say whether these nominees will help Sony as it’s not very clear to investors where the company is heading.”
Schaaff stepped down as president of Sony Network Entertainment, the company’s online service, last year after attacks from computer hackers compromised customer information.
Ito is a co-founder of Digital Garage Inc. (4819), a Japanese online service company whose alliance partners include Twitter Inc.
Digital Garage also has a stake in Facebook Inc. (FB) through its investment arm. Akari Fukuda, a spokeswoman for Tokyo-based Digital Garage, declined to elaborate on the investments.
To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
'via Blog this'
Stock Gains Earn Young PRC Investor Two Homes
Stock Gains Earn Young PRC Investor Two Homes: "Written by Andrew Vanburen (China Correspondent)
Thursday, 30 May 2013 07:00
Main reference: Story in Sinafinance by blogger "wujiang"
I’m from Chongqing, China’s biggest municipality by size and a region known for having some of the hottest dishes in the land.
The property market here has also been heating up over the past decade or so with a healthy flow of newcomers moving in to chase jobs within a myriad range of new industries setting up shop in the city.
I’m 29 now and have been investing in A-shares for the past 11 years, but I can tell you that it hasn’t always been a bed of roses.
For the first seven years or so, I lost a lot of money buying and selling domestic stocks and have often found myself at the bottom of the barrel looking up, wondering how I fell this far.
To be honest, I’ve been driven as much by ambition as by envy as I’ve seen a fair share of my peers making money in both bull and bear markets.
This has kept me from giving up and propelled me to do more homework before making my next moves.
But beginning in around 2009, or around a year after Wall Street sneezed and the world caught a cold, my shifting portfolio began slowly earning its keep and padding my pockets.
Although I can’t say I’ve built up anything close to a big enough nest egg to retire on yet, I have managed to wring enough money out of equities to land myself two property purchases so far in Chongqing.
Neither is much to write home about, with both small but new units totaling just 110 square meters, and I also have over 100,000 yuan in the bank.
It just feels right to have something tangible to my name like property assets to call my own.
Let’s face it... I can display on demand my paper assets in stocks and bonds in an instant, but the former could plummet by 50% in value in any given trading week.
These intangible stock ownership certificates have enabled me to get 110 square meters of concrete assets – literally – under my feet, though they could also plunge in value by 50% following a potential property bubble burst.
But while a printout proving I own 10,000 shares of Company A might suddenly be worth half of what it was a week ago, it’s still just a piece of paper after all.
On the other hand, a home worth half its value is still going to have at least four walls and keep the rain off my head.
Therefore, I wish I could make some stock picks for you today, or point to sectors that I think are about to catch fire.
But I am not big on giving away secrets of the trade.
Instead, I just want to urge investors to remember the importance of fixed, immovable assets and how even an underwater mortgage can apply to an immovable and well-built apartment unit.
So when you finally get your head above water and have gathered a few chips on your corner of the table, sometimes it’s wise to cash in a few for a tangible asset like property rather than wildly going all-in on a new hunch.
Everything in moderation – and proportion – as they say.
"
'via Blog this'
Thursday, 30 May 2013 07:00
Main reference: Story in Sinafinance by blogger "wujiang"
I’m from Chongqing, China’s biggest municipality by size and a region known for having some of the hottest dishes in the land.
The property market here has also been heating up over the past decade or so with a healthy flow of newcomers moving in to chase jobs within a myriad range of new industries setting up shop in the city.
I’m 29 now and have been investing in A-shares for the past 11 years, but I can tell you that it hasn’t always been a bed of roses.
For the first seven years or so, I lost a lot of money buying and selling domestic stocks and have often found myself at the bottom of the barrel looking up, wondering how I fell this far.
To be honest, I’ve been driven as much by ambition as by envy as I’ve seen a fair share of my peers making money in both bull and bear markets.
This has kept me from giving up and propelled me to do more homework before making my next moves.
But beginning in around 2009, or around a year after Wall Street sneezed and the world caught a cold, my shifting portfolio began slowly earning its keep and padding my pockets.
Although I can’t say I’ve built up anything close to a big enough nest egg to retire on yet, I have managed to wring enough money out of equities to land myself two property purchases so far in Chongqing.
Neither is much to write home about, with both small but new units totaling just 110 square meters, and I also have over 100,000 yuan in the bank.
It just feels right to have something tangible to my name like property assets to call my own.
Let’s face it... I can display on demand my paper assets in stocks and bonds in an instant, but the former could plummet by 50% in value in any given trading week.
These intangible stock ownership certificates have enabled me to get 110 square meters of concrete assets – literally – under my feet, though they could also plunge in value by 50% following a potential property bubble burst.
But while a printout proving I own 10,000 shares of Company A might suddenly be worth half of what it was a week ago, it’s still just a piece of paper after all.
On the other hand, a home worth half its value is still going to have at least four walls and keep the rain off my head.
Therefore, I wish I could make some stock picks for you today, or point to sectors that I think are about to catch fire.
But I am not big on giving away secrets of the trade.
Instead, I just want to urge investors to remember the importance of fixed, immovable assets and how even an underwater mortgage can apply to an immovable and well-built apartment unit.
So when you finally get your head above water and have gathered a few chips on your corner of the table, sometimes it’s wise to cash in a few for a tangible asset like property rather than wildly going all-in on a new hunch.
Everything in moderation – and proportion – as they say.
"
'via Blog this'
Tuesday, May 28, 2013
China Stocks: Why Goldman Likes This Market Laggard
China Stocks: Why Goldman Likes This Market Laggard:
"The market's response to progress on reforms has been more pronounced, whereas reactions to cyclical stimulus have held less and less conviction," wrote Helen Zhu, chief China equity strategist at the bank.
"Over the coming months we expect reform news flow to intensify and still see opportunity for reform progress to support valuations towards our year-end target," she said. The bank expects the MSCI China to rise 14 percent from current levels.
'via Blog this'
"The market's response to progress on reforms has been more pronounced, whereas reactions to cyclical stimulus have held less and less conviction," wrote Helen Zhu, chief China equity strategist at the bank.
"Over the coming months we expect reform news flow to intensify and still see opportunity for reform progress to support valuations towards our year-end target," she said. The bank expects the MSCI China to rise 14 percent from current levels.
'via Blog this'
Here’s How QE Tapering Could Hurt Asia
Here’s How QE Tapering Could Hurt Asia: ""Strong capital inflows to emerging Asia, coupled with a prolonged period of low real policy rates have led to a worsening of emerging Asia's economic fundamentals," the bank, which expects the U.S. Federal Reserve to start scaling back its bond buying program at the end of September, wrote in a report on Tuesday.
With interest rates remaining low, domestic private debt – including loans by financial institutions to households and companies and corporate bonds - in the region has surged, particularly in countries such as Hong Kong and Singapore that now face risks of property bubbles."
Furthermore, there has been an increase in foreign currency denominated external borrowing which increases the risk of a "currency mismatch" if Asian currencies depreciate sharply, the bank said.
"Potential large foreign equity and/or bond-related outflows are a significant risk for Asia currencies," the bank said. Currencies most at risk are those from countries that are running current account deficits or small current account surpluses such as the Indian rupee and Indonesian rupiah.
Who's Most Vulnerable
According to Nomura, Hong Kong, Singapore, India and Indonesia will be the most vulnerable to a winding down of QE.
With its currency pegged to the greenback, Hong Kong has imported the U.S.'s loose monetary policy which has in turn stoked an unprecedented boom in its housing market. Property prices have risen by 128 percent since December 2008 and a tapering of QE could trigger a major correction in the market as interest rates rise and liquidity tightens, Nomura said.
"The 1997 [Asian financial] crisis in Hong Kong was also to a large extent driven by housing wealth, and the property bubble bursting eventually led to a sharp decline in consumption, which plunged the economy into a deep recession and deflation," Nomura analysts wrote.
Singapore, a country in which a sizable sum of household assets are concentrated in property, would be subject to similar risks.
"Domestic interest rates could rise sharply and lead to balance sheet problems for households which increased leveraged on the assumption that property prices would remain buoyant," the bank said.
Indonesia and India are also at major risk, but for another reason. They both face large current account deficits and have hence become more reliant on portfolio flows to finance them.
(Read More: Flood of Easy Money Putting This Region at Risk)
In Indonesia, a reversal of portfolio flows could exert heavy pressure on the balance of payments, causing the Indonesian rupiah to depreciate substantially, the bank said.
"Given the potential size of the outflows, this could force the Bank of Indonesia to implement significant policy rate hikes, which would in turn dampen consumer and investment spending," the bank said.
Similarly, in India, a reversal of capital inflows would "wreak havoc" on the rupee and the country's equity market. Net capital inflows into Asia's third largest economy totaled $88 billion in 2012, spurred by global quantitative easing.
"Asset price volatility and a slowdown in capital inflows would hurt investment, as uncertainty further delayed a revival of the capex cycle," the bank said.
'via Blog this'
With interest rates remaining low, domestic private debt – including loans by financial institutions to households and companies and corporate bonds - in the region has surged, particularly in countries such as Hong Kong and Singapore that now face risks of property bubbles."
Furthermore, there has been an increase in foreign currency denominated external borrowing which increases the risk of a "currency mismatch" if Asian currencies depreciate sharply, the bank said.
"Potential large foreign equity and/or bond-related outflows are a significant risk for Asia currencies," the bank said. Currencies most at risk are those from countries that are running current account deficits or small current account surpluses such as the Indian rupee and Indonesian rupiah.
Who's Most Vulnerable
According to Nomura, Hong Kong, Singapore, India and Indonesia will be the most vulnerable to a winding down of QE.
With its currency pegged to the greenback, Hong Kong has imported the U.S.'s loose monetary policy which has in turn stoked an unprecedented boom in its housing market. Property prices have risen by 128 percent since December 2008 and a tapering of QE could trigger a major correction in the market as interest rates rise and liquidity tightens, Nomura said.
"The 1997 [Asian financial] crisis in Hong Kong was also to a large extent driven by housing wealth, and the property bubble bursting eventually led to a sharp decline in consumption, which plunged the economy into a deep recession and deflation," Nomura analysts wrote.
Singapore, a country in which a sizable sum of household assets are concentrated in property, would be subject to similar risks.
"Domestic interest rates could rise sharply and lead to balance sheet problems for households which increased leveraged on the assumption that property prices would remain buoyant," the bank said.
Indonesia and India are also at major risk, but for another reason. They both face large current account deficits and have hence become more reliant on portfolio flows to finance them.
(Read More: Flood of Easy Money Putting This Region at Risk)
In Indonesia, a reversal of portfolio flows could exert heavy pressure on the balance of payments, causing the Indonesian rupiah to depreciate substantially, the bank said.
"Given the potential size of the outflows, this could force the Bank of Indonesia to implement significant policy rate hikes, which would in turn dampen consumer and investment spending," the bank said.
Similarly, in India, a reversal of capital inflows would "wreak havoc" on the rupee and the country's equity market. Net capital inflows into Asia's third largest economy totaled $88 billion in 2012, spurred by global quantitative easing.
"Asset price volatility and a slowdown in capital inflows would hurt investment, as uncertainty further delayed a revival of the capex cycle," the bank said.
'via Blog this'
TERENCE WONG: "REITS are over-owned, downgrading REITS"
TERENCE WONG: "REITS are over-owned, downgrading REITS":
> Focus on interest rates. The Japanese Government Bond (JGB) yields have been climbing as investors regain confidence in the country. This poses a problem as the Japanese have been accustomed to cheap money.
And the rise goes against Kuroda’s growth strategy to keep interest rates low and stable to boost borrowing and investment.
US Federal Reserve chairman Ben Bernanke also spooked markets as he revealed that the Fed could start to taper back its monthly bond purchases of USD85bn within the next few months.
>> REITs over-owned! This validates one of my key thesis during the current marketing round on the REITs – it is a highly over-owned sector and a potential interest rate hike would send the stock prices of the REITs falling.
'via Blog this'
> Focus on interest rates. The Japanese Government Bond (JGB) yields have been climbing as investors regain confidence in the country. This poses a problem as the Japanese have been accustomed to cheap money.
And the rise goes against Kuroda’s growth strategy to keep interest rates low and stable to boost borrowing and investment.
US Federal Reserve chairman Ben Bernanke also spooked markets as he revealed that the Fed could start to taper back its monthly bond purchases of USD85bn within the next few months.
>> REITs over-owned! This validates one of my key thesis during the current marketing round on the REITs – it is a highly over-owned sector and a potential interest rate hike would send the stock prices of the REITs falling.
'via Blog this'
Sony’s Bread and Butter? It’s Not Electronics
Sony’s Bread and Butter? It’s Not Electronics: "Sony is best known as a consumer electronics company, making PlayStation game consoles and televisions. And it loses money on almost every gadget it sells.
Sony has made money making Hollywood movies and selling music. That profitable part of the business is what Daniel S. Loeb, an American investor and manager of the hedge fund Third Point, wants Sony to spin off to raise cash to resuscitate its electronics business."
Although Sony sells hundreds of products as varied as batteries and head-mounted 3-D displays, it so happens that Sony's most successful business is selling insurance. While it doesn't run this business in the United States or Europe, Sony makes a lot of money writing life, auto and medical policies in Japan.
Its financial arm accounted for 63 percent of Sony's total operating profit last year. Life insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion) in operating profit in the 10 years that ended in March.
Sony's film and music divisions, which produced hits like the Spider-Man movies and "Zero Dark Thirty" and recorded musicians like the cellist Yo-Yo Ma and the electronic music duo Daft Punk, have contributed $7 billion to the company's bottom line over the last decade.But to a small band of analysts, Mr. Loeb's prescriptions for Sony are shortsighted, merely milking the company's profit-making content business for good money to throw after the bad.
As proof of the untenable future facing Sony's electronics, critics point to its televisions and smartphones. Competition is intense, and in cellphones Sony remains a bit player. Even where it is more successful, in digital cameras or game consoles, it is struggling to stay abreast of stronger companies.
Sheer lack of managerial attention could soon start to hurt Sony's insurance and entertainment divisions, Mr. Yamada warned. Sony Financial Holdings, a publicly traded company of which Sony owns 60 percent, has been under performing its peers on the Tokyo stock exchange. Its share price has risen just 4 percent this year, compared to a 36 percent increase in shares of its rival, Dai-ichi Life Insurance.Sony's co-founder, Akio Morita, first got the idea of buying a finance company on a trip to the United States in the 1950s to promote the company's new transistor radio, according to an official recounting of its corporate history. On that trip, Mr. Morita was stunned by the sight of Chicago's skyscrapers, especially the Prudential Building that dominated the Chicago skyline.
"Why would a life insurance company have such an enormous building?" Mr. Morita marveled. "One day, we will also establish our own bank or financial institution and build a building like that."
Mr. Morita's wish was finally granted in 1981, when Sony started a life insurance venture in Japan with Prudential, the large American insurance company. Perhaps disappointingly, Sony Financial Holdings has its headquarters on the fourth floor of a nondescript midrise building in Tokyo.
Sony's acquisitions of Columbia Pictures and CBS Records in the late 1980s got a lot more attention. Mr. Morita, a co-founder of Sony, and another executive, Norio Ohga, had long contended that content was crucial in promoting Sony's expanding electronics universe, first wading into music with a venture with CBS Records in 1968.
But infighting between hardware and movies hindered that objective from the start, as did misaligned incentives that led Sony to wrestle with how to build devices that let consumers download and copy content without undermining sales at its music labels or film studios.
"Sony has tried to make this strategy work for a long time," said Gerhard Fasol, president of the Tokyo technology consulting firm Eurotechnology Japan, "But it's never really worked. Each part would be better competing on its own."
Insurance never had that conflict. Sony's 4,100 "Lifeplanners" would visit homes and offices to offer advice and make sales. Sony also runs a Web-only bank, Sony Bank, which accepts deposits and offers mortgage products, investment trusts and foreign-exchange margin trading.
On Wednesday, Mr. Hirai defended the company's continued focus on electronics. "Electronics has a future. And it is in Sony's DNA," he said at a corporate presentation. "It is my mission to revive it."
There are some glimmers that Sony is finding its way again, even as Apple and Samsung widen their lead. Sony's sleek new XPeria Z smartphone has received generally rave reviews. Photography buffs have called its high-end, full-frame RX1 camera the most advanced compact camera.
"Not so long ago, we had despaired at Sony's ability to ever again produce stellar products (especially when faced with duds like the Dash alarm clock and the Rolly music player)," Damian Thong, Tokyo-based technology analyst at Macquarie Securities, said in a report published Thursday.
"Yet we now have had a consistent run of beautifully designed, technologically advanced, class-leading products," Mr. Thong said. "We think these products hark back to Sony's glory days."
Last quarter, Sony was back in the black, but its electronics division continued to lose money.
'via Blog this'
Sony has made money making Hollywood movies and selling music. That profitable part of the business is what Daniel S. Loeb, an American investor and manager of the hedge fund Third Point, wants Sony to spin off to raise cash to resuscitate its electronics business."
Although Sony sells hundreds of products as varied as batteries and head-mounted 3-D displays, it so happens that Sony's most successful business is selling insurance. While it doesn't run this business in the United States or Europe, Sony makes a lot of money writing life, auto and medical policies in Japan.
Its financial arm accounted for 63 percent of Sony's total operating profit last year. Life insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion) in operating profit in the 10 years that ended in March.
Sony's film and music divisions, which produced hits like the Spider-Man movies and "Zero Dark Thirty" and recorded musicians like the cellist Yo-Yo Ma and the electronic music duo Daft Punk, have contributed $7 billion to the company's bottom line over the last decade.But to a small band of analysts, Mr. Loeb's prescriptions for Sony are shortsighted, merely milking the company's profit-making content business for good money to throw after the bad.
As proof of the untenable future facing Sony's electronics, critics point to its televisions and smartphones. Competition is intense, and in cellphones Sony remains a bit player. Even where it is more successful, in digital cameras or game consoles, it is struggling to stay abreast of stronger companies.
Sheer lack of managerial attention could soon start to hurt Sony's insurance and entertainment divisions, Mr. Yamada warned. Sony Financial Holdings, a publicly traded company of which Sony owns 60 percent, has been under performing its peers on the Tokyo stock exchange. Its share price has risen just 4 percent this year, compared to a 36 percent increase in shares of its rival, Dai-ichi Life Insurance.Sony's co-founder, Akio Morita, first got the idea of buying a finance company on a trip to the United States in the 1950s to promote the company's new transistor radio, according to an official recounting of its corporate history. On that trip, Mr. Morita was stunned by the sight of Chicago's skyscrapers, especially the Prudential Building that dominated the Chicago skyline.
"Why would a life insurance company have such an enormous building?" Mr. Morita marveled. "One day, we will also establish our own bank or financial institution and build a building like that."
Mr. Morita's wish was finally granted in 1981, when Sony started a life insurance venture in Japan with Prudential, the large American insurance company. Perhaps disappointingly, Sony Financial Holdings has its headquarters on the fourth floor of a nondescript midrise building in Tokyo.
Sony's acquisitions of Columbia Pictures and CBS Records in the late 1980s got a lot more attention. Mr. Morita, a co-founder of Sony, and another executive, Norio Ohga, had long contended that content was crucial in promoting Sony's expanding electronics universe, first wading into music with a venture with CBS Records in 1968.
But infighting between hardware and movies hindered that objective from the start, as did misaligned incentives that led Sony to wrestle with how to build devices that let consumers download and copy content without undermining sales at its music labels or film studios.
"Sony has tried to make this strategy work for a long time," said Gerhard Fasol, president of the Tokyo technology consulting firm Eurotechnology Japan, "But it's never really worked. Each part would be better competing on its own."
Insurance never had that conflict. Sony's 4,100 "Lifeplanners" would visit homes and offices to offer advice and make sales. Sony also runs a Web-only bank, Sony Bank, which accepts deposits and offers mortgage products, investment trusts and foreign-exchange margin trading.
On Wednesday, Mr. Hirai defended the company's continued focus on electronics. "Electronics has a future. And it is in Sony's DNA," he said at a corporate presentation. "It is my mission to revive it."
There are some glimmers that Sony is finding its way again, even as Apple and Samsung widen their lead. Sony's sleek new XPeria Z smartphone has received generally rave reviews. Photography buffs have called its high-end, full-frame RX1 camera the most advanced compact camera.
"Not so long ago, we had despaired at Sony's ability to ever again produce stellar products (especially when faced with duds like the Dash alarm clock and the Rolly music player)," Damian Thong, Tokyo-based technology analyst at Macquarie Securities, said in a report published Thursday.
"Yet we now have had a consistent run of beautifully designed, technologically advanced, class-leading products," Mr. Thong said. "We think these products hark back to Sony's glory days."
Last quarter, Sony was back in the black, but its electronics division continued to lose money.
'via Blog this'
Monday, May 27, 2013
What Are Growth Themes In China Shares?
What Are Growth Themes In China Shares?:
However, the answer – however comprehensive – isn’t necessarily one or the other, or a zero sum game.
Nor is it taking a blind “dartboard” approach to stock picking, or diversifying to such an extent that even if one pick skyrockets.
In this strategy, there is little upside to the individual investor because the stake held in the surging counter is so insignificant.
Instead, a successful sharebuying strategy is more likely to be a healthy and risk-sensitive admixture of the two within a diversified and sustainable portfolio.
However, longer-term thinking investors should start being more bullish on growth or growth potential stocks over value stocks.
The new national government in Beijing has repeatedly stated that steady economic growth was one of its top priorities.
Chinese presidents, premiers and Cabinets are typically given around a decade’s time to leave their mark on history.
Therefore, with Beijing’s strong pro-growth policies, its repeated calls to pursue the “Chinese Dream” including helping bridge the growing economic divide, and outright support for several key industries, growth stocks should be the key component of investors’ portfolios over the next few years.
Thanks to the supportive incubator that Beijing is helping set up, growth stocks are likely to outperform value stocks, cyclical stocks and even blue chips in the years ahead.
Therefore, in many cases, policy will be a better guide and a more reliable driver for share prices than even core financial performance.
One of the most useful offshoots from the Wall Street meltdown in the summer of 2008 was the way in which it revealed in full splendor China’s dangerous overreliance on foreign consumers.
When wallets stopped opening in North America, Europe and Japan, export orders dried up seemingly overnight.
Not only did this reveal a perilous overcapacity situation in Chinese factories, but also left provincial governments saddled with new and crippling debt from pre-Crash overinvestment.
'via Blog this'
However, the answer – however comprehensive – isn’t necessarily one or the other, or a zero sum game.
Nor is it taking a blind “dartboard” approach to stock picking, or diversifying to such an extent that even if one pick skyrockets.
In this strategy, there is little upside to the individual investor because the stake held in the surging counter is so insignificant.
Instead, a successful sharebuying strategy is more likely to be a healthy and risk-sensitive admixture of the two within a diversified and sustainable portfolio.
However, longer-term thinking investors should start being more bullish on growth or growth potential stocks over value stocks.
The new national government in Beijing has repeatedly stated that steady economic growth was one of its top priorities.
Chinese presidents, premiers and Cabinets are typically given around a decade’s time to leave their mark on history.
Therefore, with Beijing’s strong pro-growth policies, its repeated calls to pursue the “Chinese Dream” including helping bridge the growing economic divide, and outright support for several key industries, growth stocks should be the key component of investors’ portfolios over the next few years.
Thanks to the supportive incubator that Beijing is helping set up, growth stocks are likely to outperform value stocks, cyclical stocks and even blue chips in the years ahead.
Therefore, in many cases, policy will be a better guide and a more reliable driver for share prices than even core financial performance.
One of the most useful offshoots from the Wall Street meltdown in the summer of 2008 was the way in which it revealed in full splendor China’s dangerous overreliance on foreign consumers.
When wallets stopped opening in North America, Europe and Japan, export orders dried up seemingly overnight.
Not only did this reveal a perilous overcapacity situation in Chinese factories, but also left provincial governments saddled with new and crippling debt from pre-Crash overinvestment.
'via Blog this'
Data to Show Signs of Life in Japan’s Economy?
Data to Show Signs of Life in Japan’s Economy?: ""Japanese data on manufacturing conditions and household spending are likely to show further signs of improvement, but it's likely to be too early to expect CPI [consumer price inflation]data to show fading deflationary pressures," Shane Oliver, chief economist at AMP Capital, said in a research note."
'via Blog this'
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Hard to See Smooth QE Exit in US, Japan: Dallara
Hard to See Smooth QE Exit in US, Japan: Dallara: ""The European economy remains in deep trouble in fact I think it's in deeper structural difficulty than many realize. I was in Beijing for the last few days and I was slightly surprised at the somewhat optimistic outlook for outlook for Europe that I found by many officials and private sector leaders there," he said."
'via Blog this'
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North Korea: How the Least-Wired Country Became a Hacking Superpower
North Korea: How the Least-Wired Country Became a Hacking Superpower:
This year, North Korea has been flaunting its nuclear hardware in an effort to extort concessions from the United States and South Korea.
But the tactic has failed to provoke panic for one key reason: Officials doubt that Pyongyang would be stupid enough to start a nuclear war.
While nukes are better seen than used, and thus of limited blackmail value, dictator Kim Jong Un possesses a quieter weapon that's more readily unleashed — and has already become a serious nuisance: cyber war.
Experts say Pyongyang typically deploys it about once a year, although it's not always clear that North Korea is behind the attacks.
The most recent offensive hit Seoul in April 2013. The strike disabled anti-virus software, brought down ATMs across the country and froze online banking systems for days. About 30,000 computers had their hard drives wiped and went dead.
In an Austin Powers-style twist, the malicious software displayed pixilated skulls on the monitors of infected machines.
After initially saying the strike originated in China, officials tracked it to a specific Pyongyang neighborhood. A month before the assault erupted, they said, hackers had quietly planted a simple but devastating software program on computers at three South Korean television broadcasters and three banks. Authorities identified the code as a hard-drive wiper called "DarkSeoul," first identified a year ago.
(Read More: North Korea Sends Top Kim Jong-Un Aide to Beijing)
Although this type of virus is relatively simple and has been around since the early 1980s, experts acknowledged that its impact was devastating. A computer security expert from Cisco, Seth Hanford, wrote that the "highly targeted" attack led to significant downtime and a "severe" loss of data.
On April 12, North Korea denied it was the culprit, but the South has maintained the accusation.
Although North Korea is among the poorest and most isolated countries, it is surprisingly adept at hacking — a testament to how dangerously accessible cyber warfare is to anyone that wants to pursue it.
Training a cyber brigade, it turns out, does not demand high levels of tech sophistication, and is a handy way to pester a far stronger foe.
A Convenient Arsenal
On the Korean battlefield — which remains manned 60 years after the end of the shooting war that divided the Koreas — the North is indisputably outgunned and outmaneuvered. That fact has led Pyongyang to adopt a modified guerrilla warfare strategy. As the Pentagon described it in a May report to Congress: "North Korea uses small-scale attacks to gain psychological advantage in diplomacy and win limited political and economic concessions."
In the 1970s and 1980s, Pyongyang sent agents on risky operations to sabotage South Korean targets and hijack one South Korean civilian airliner. In November 2010, the north launched an artillery barrage at an island near the DMZ, and sunk a South Korean naval corvette in March 2010, leaving 46 South Korean sailors dead.
Strikes like these, however, can provoke dangerous retaliation. In contrast, cyber warfare supports the nation's military strategy, and carries less risk.
A digital offensive requires a "very low developmental cost and can bring catastrophic results," said Hyeong-wook Boo, an analyst at the Korea Institute for Defense Analyses, a think tank in Seoul. "The North Korean espionage team sees cyberspace as a very favorable place for its activities."
(Read More: North Korea Fires Fifth Missile in Three Days)
The threat has been looming since the late 1990s, when North Korea unleashed its first basic denial of service (DDoS) attacks on its neighbor. Since then, the computer plots have become somewhat more sophisticated, targeting South Korean banks and businesses with malware and throwing the occasional wrench in the markets.
According to the National Intelligence Service, South Korea's spy agency, the north was probably behind six cyber attacks from 2008 to 2012. Two of the largest came in 2009 and 2011, when Seoul accused the North of sneaking malware into its biggest banks and attacking government websites.
In the first of these, the US was also a key target.
Starting on July 4, 2009, hackers activated a "botnet" of 50,000 hijacked zombie computers to coordinate three waves of assaults targeting the public websites of the Pentagon and White House. The denial of service attacks also disrupted the websites of the South Korean intelligence agency and a major South Korean newspaper, but did not bring them down completely.
Two years later, Seoul accused North Korea of unleashing a far stronger salvo of denial-of-service attacks on government and banking cyber-networks. The South Korean government said that North Korean hackers had gained control of the laptop of an IBM employee, who was a cyber security contractor for the large Korean bank, Nonghyup. (IBM did not respond to calls seeking comment.)
The sleuths managed to access the company's entire banking system. The attack was contained by government-backed antivirus programs, but authorities admitted they were worried by the magnitude of the onslaught.
The March, 2011 attack turned out to be the most devastating so far. The episode, if committed by the North Korean military, demonstrated that while North Korea still hasn't reached an incredible sophistication in its hacking brigade, it still has the potential to wreak havoc with a well-placed and well-timed assault.
"They targeted the spots they've always wanted to target," said Andrei Lankov, a North Korea expert at Kookmin University in Seoul. "It is highly likely that this was committed by North Korea. They hit the banks, because they've always want to inflict damage on the South Korean economy. Their reason for attacking the media was to show contempt for them as mouthpieces."
'via Blog this'
This year, North Korea has been flaunting its nuclear hardware in an effort to extort concessions from the United States and South Korea.
But the tactic has failed to provoke panic for one key reason: Officials doubt that Pyongyang would be stupid enough to start a nuclear war.
While nukes are better seen than used, and thus of limited blackmail value, dictator Kim Jong Un possesses a quieter weapon that's more readily unleashed — and has already become a serious nuisance: cyber war.
Experts say Pyongyang typically deploys it about once a year, although it's not always clear that North Korea is behind the attacks.
The most recent offensive hit Seoul in April 2013. The strike disabled anti-virus software, brought down ATMs across the country and froze online banking systems for days. About 30,000 computers had their hard drives wiped and went dead.
In an Austin Powers-style twist, the malicious software displayed pixilated skulls on the monitors of infected machines.
After initially saying the strike originated in China, officials tracked it to a specific Pyongyang neighborhood. A month before the assault erupted, they said, hackers had quietly planted a simple but devastating software program on computers at three South Korean television broadcasters and three banks. Authorities identified the code as a hard-drive wiper called "DarkSeoul," first identified a year ago.
(Read More: North Korea Sends Top Kim Jong-Un Aide to Beijing)
Although this type of virus is relatively simple and has been around since the early 1980s, experts acknowledged that its impact was devastating. A computer security expert from Cisco, Seth Hanford, wrote that the "highly targeted" attack led to significant downtime and a "severe" loss of data.
On April 12, North Korea denied it was the culprit, but the South has maintained the accusation.
Although North Korea is among the poorest and most isolated countries, it is surprisingly adept at hacking — a testament to how dangerously accessible cyber warfare is to anyone that wants to pursue it.
Training a cyber brigade, it turns out, does not demand high levels of tech sophistication, and is a handy way to pester a far stronger foe.
A Convenient Arsenal
On the Korean battlefield — which remains manned 60 years after the end of the shooting war that divided the Koreas — the North is indisputably outgunned and outmaneuvered. That fact has led Pyongyang to adopt a modified guerrilla warfare strategy. As the Pentagon described it in a May report to Congress: "North Korea uses small-scale attacks to gain psychological advantage in diplomacy and win limited political and economic concessions."
In the 1970s and 1980s, Pyongyang sent agents on risky operations to sabotage South Korean targets and hijack one South Korean civilian airliner. In November 2010, the north launched an artillery barrage at an island near the DMZ, and sunk a South Korean naval corvette in March 2010, leaving 46 South Korean sailors dead.
Strikes like these, however, can provoke dangerous retaliation. In contrast, cyber warfare supports the nation's military strategy, and carries less risk.
A digital offensive requires a "very low developmental cost and can bring catastrophic results," said Hyeong-wook Boo, an analyst at the Korea Institute for Defense Analyses, a think tank in Seoul. "The North Korean espionage team sees cyberspace as a very favorable place for its activities."
(Read More: North Korea Fires Fifth Missile in Three Days)
The threat has been looming since the late 1990s, when North Korea unleashed its first basic denial of service (DDoS) attacks on its neighbor. Since then, the computer plots have become somewhat more sophisticated, targeting South Korean banks and businesses with malware and throwing the occasional wrench in the markets.
According to the National Intelligence Service, South Korea's spy agency, the north was probably behind six cyber attacks from 2008 to 2012. Two of the largest came in 2009 and 2011, when Seoul accused the North of sneaking malware into its biggest banks and attacking government websites.
In the first of these, the US was also a key target.
Starting on July 4, 2009, hackers activated a "botnet" of 50,000 hijacked zombie computers to coordinate three waves of assaults targeting the public websites of the Pentagon and White House. The denial of service attacks also disrupted the websites of the South Korean intelligence agency and a major South Korean newspaper, but did not bring them down completely.
Two years later, Seoul accused North Korea of unleashing a far stronger salvo of denial-of-service attacks on government and banking cyber-networks. The South Korean government said that North Korean hackers had gained control of the laptop of an IBM employee, who was a cyber security contractor for the large Korean bank, Nonghyup. (IBM did not respond to calls seeking comment.)
The sleuths managed to access the company's entire banking system. The attack was contained by government-backed antivirus programs, but authorities admitted they were worried by the magnitude of the onslaught.
The March, 2011 attack turned out to be the most devastating so far. The episode, if committed by the North Korean military, demonstrated that while North Korea still hasn't reached an incredible sophistication in its hacking brigade, it still has the potential to wreak havoc with a well-placed and well-timed assault.
"They targeted the spots they've always wanted to target," said Andrei Lankov, a North Korea expert at Kookmin University in Seoul. "It is highly likely that this was committed by North Korea. They hit the banks, because they've always want to inflict damage on the South Korean economy. Their reason for attacking the media was to show contempt for them as mouthpieces."
'via Blog this'
China Profit Growth Quickens, No Harbinger of Recovery
China Profit Growth Quickens, No Harbinger of Recovery:
China's industrial profits growth quickened in April from the previous month, though the government noted that the pickup was due mainly to a low comparative base, indicating that the world's second largest economy still faces slack domestic and external demand.
Chinese firms made profits of 436.7 billion yuan ($71.22 billion) in April, up 9.3 percent from the same month last year, quickening from a year-on-year growth of 5.3 percent in March, the National Bureau of Statistics said on Monday.
(Read More: Outlook for China's Economy Just Keeps Getting Worse)
The improved gains in April were caused by the low comparison base in the same month a year earlier, Yu Jianxun, an official from the bureau's industrial department, said in a statement accompanying the data.
Profits had fallen 2.2 percent in April last year from 2011, compared with gains of 4.5 percent year-on-year growth in March 2012, said Yu.
In the first four months on 2013, Chinese firms made total profits of 1.61 trillion yuan, up 11.4 percent from the same period a year ago, the NBS said (www.stats.gov.cn).
(Read More: China, EU to Discuss Trade Disputes on Monday)
Among the 41 industries tracked, 30 posted profit growth and eight reported a profit drop in the first four months compared with the year earlier period.
Three sectors reported turnarounds in profitability. Profits for manufacturers of computers, telecommuications equipment and electronics were up 44.8 percent from the same period last year, while those in the electricity and heat production and supply industry leapt 92.6 percent.
The ferrous metal smelting and rolling industry reported a 38.6 percent year-on-year increase in profits during the period, while profits in auto manufacturing rose 12.9 percent.
(Read More: Two Big Asian Rivals Start a 'Beautiful Friendship')
Petroleum refining, coking and nuclear fuel processing sectors swung into profit from losses in the first four months, while profits in oil and gas exploration dropped 7.9 percent.
The figures come after the HSBC/Markit flash purchasing managers index, the earliest indicator of China's industrial activity, showed a contraction for the first time in seven months in May as new orders fell.
The PMI added to concerns that China's economic recovery has stalled and that a sharper cooldown may be imminent.
'via Blog this'
China's industrial profits growth quickened in April from the previous month, though the government noted that the pickup was due mainly to a low comparative base, indicating that the world's second largest economy still faces slack domestic and external demand.
Chinese firms made profits of 436.7 billion yuan ($71.22 billion) in April, up 9.3 percent from the same month last year, quickening from a year-on-year growth of 5.3 percent in March, the National Bureau of Statistics said on Monday.
(Read More: Outlook for China's Economy Just Keeps Getting Worse)
The improved gains in April were caused by the low comparison base in the same month a year earlier, Yu Jianxun, an official from the bureau's industrial department, said in a statement accompanying the data.
Profits had fallen 2.2 percent in April last year from 2011, compared with gains of 4.5 percent year-on-year growth in March 2012, said Yu.
In the first four months on 2013, Chinese firms made total profits of 1.61 trillion yuan, up 11.4 percent from the same period a year ago, the NBS said (www.stats.gov.cn).
(Read More: China, EU to Discuss Trade Disputes on Monday)
Among the 41 industries tracked, 30 posted profit growth and eight reported a profit drop in the first four months compared with the year earlier period.
Three sectors reported turnarounds in profitability. Profits for manufacturers of computers, telecommuications equipment and electronics were up 44.8 percent from the same period last year, while those in the electricity and heat production and supply industry leapt 92.6 percent.
The ferrous metal smelting and rolling industry reported a 38.6 percent year-on-year increase in profits during the period, while profits in auto manufacturing rose 12.9 percent.
(Read More: Two Big Asian Rivals Start a 'Beautiful Friendship')
Petroleum refining, coking and nuclear fuel processing sectors swung into profit from losses in the first four months, while profits in oil and gas exploration dropped 7.9 percent.
The figures come after the HSBC/Markit flash purchasing managers index, the earliest indicator of China's industrial activity, showed a contraction for the first time in seven months in May as new orders fell.
The PMI added to concerns that China's economic recovery has stalled and that a sharper cooldown may be imminent.
'via Blog this'
China Struggles to Find Head for Sovereign Wealth Fund
China Struggles to Find Head for Sovereign Wealth Fund:
"Those with the right qualifications don't want the job. Those who want the job don't have the right qualifications," said one CIC executive, who confirmed that the fund was having a hard time finding a new leader.
(Read More: Outlook for China's Economy Just keeps Getting Worse)
CIC was founded to great fanfare in 2007 as a vehicle to generate higher returns on China's vast foreign exchange reserves. It has been courted by foreign governments and companies and its investments have spanned the globe, from Brazil to Australia and Russia.
In Europe, it has bought into satellite operator Eutelstat Communications as well as French energy group GDF Suez. Britain has been among the biggest beneficiaries with CIC taking stakes in Heathrow airport and Thames Water, and being invited to invest in London's planned "super sewer".
The concern for those who have been asked to run CIC is that the wealth fund may have nasty surprises on its books and they are afraid it will prove a poisoned chalice if they bear the blame for investments that fare poorly, the people said.
(Read More: China Growth to Hit 9% by Mid-2014: Deutsche Bank)
"CIC scattered a lot of seeds quite hurriedly and widely. It's not clear how many will actually grow into trees and how many of those will bear fruit," said a senior official at a CIC-owned bank who has been briefed on the fund's portfolio.
More From The Financial Times:
Profile: Lou Jiwei Opens Doors for CIC
Markets Insight: Asia's SWFs Must Shed Political Shackles
Chinese Groups Seek $3.6 Billion Through Share Sales
CIC has faced intense criticism in China for botched investments and has seen its funding squeezed by a dispute over its control.
It is well known that two of CIC's earliest investments – stakes in Morgan Stanley and private equity firm Blackstone – resulted in big paper losses when the global financial crisis erupted in 2008. The banker said some of CIC's less publicized investments in property and private equity were also under water. CIC declined to comment.
While new bosses can usually blame their predecessors for problems, the banker said this would be harder in the case of CIC because Mr. Lou is now one of China's most powerful policy makers.
China's top leaders, including Premier Li Keqiang are involved in choosing CIC's chairman, so the reluctant candidates have had to make compelling cases to turn the job down. One of the people familiar with the process said Mr. Tu had argued that he had more work to do transforming Shanghai into a global financial center, a goal that the central government has made a priority.
(Read More: China President Takes Charge of Sweeping Economic Reform Plans)
The leadership vacuum highlights how CIC is at risk of becoming a less central player in China's financial industry. The central bank has created a de facto sovereign wealth fund out of the State Administration of Foreign Exchange, the body which manages the country's $3.4 trillion stockpile of foreign currency holdings. Over the past five years Safe has carved off more cash to invest in stocks, property and private equity funds, covering much of the same territory as CIC.
CIC had a cumulative annualized return of 3.8 percent on its international investments from 2007 until the end of 2011. It has not yet published its detailed 2012 results but has said its performance improved, with a 10.6 percent gain last year, better than the average hedge fund return but less than the rise in the S&P 500 stock index.
(Read More: Yoshikami: Low Cost China Is Old News)
Gao Xiqing, CIC president, has been the fund's acting chief for the past two months and could end up as the default choice for chairman, two people said. Observers credit Mr. Gao with bringing professional investment discipline to CIC, but say an unwillingness to engage in politics has obstructed his promotion.
Established with $200 billion of capital, CIC pushed for a big cash infusion in 2011 when it used up this initial money. In the end it received just $30 billion, less than it expected, partly because of a bureaucratic disagreement. CIC falls under the finance ministry but the central bank is the source of its funding and wanted greater say in its management, people inside CIC have said.
'via Blog this'
"Those with the right qualifications don't want the job. Those who want the job don't have the right qualifications," said one CIC executive, who confirmed that the fund was having a hard time finding a new leader.
(Read More: Outlook for China's Economy Just keeps Getting Worse)
CIC was founded to great fanfare in 2007 as a vehicle to generate higher returns on China's vast foreign exchange reserves. It has been courted by foreign governments and companies and its investments have spanned the globe, from Brazil to Australia and Russia.
In Europe, it has bought into satellite operator Eutelstat Communications as well as French energy group GDF Suez. Britain has been among the biggest beneficiaries with CIC taking stakes in Heathrow airport and Thames Water, and being invited to invest in London's planned "super sewer".
The concern for those who have been asked to run CIC is that the wealth fund may have nasty surprises on its books and they are afraid it will prove a poisoned chalice if they bear the blame for investments that fare poorly, the people said.
(Read More: China Growth to Hit 9% by Mid-2014: Deutsche Bank)
"CIC scattered a lot of seeds quite hurriedly and widely. It's not clear how many will actually grow into trees and how many of those will bear fruit," said a senior official at a CIC-owned bank who has been briefed on the fund's portfolio.
More From The Financial Times:
Profile: Lou Jiwei Opens Doors for CIC
Markets Insight: Asia's SWFs Must Shed Political Shackles
Chinese Groups Seek $3.6 Billion Through Share Sales
CIC has faced intense criticism in China for botched investments and has seen its funding squeezed by a dispute over its control.
It is well known that two of CIC's earliest investments – stakes in Morgan Stanley and private equity firm Blackstone – resulted in big paper losses when the global financial crisis erupted in 2008. The banker said some of CIC's less publicized investments in property and private equity were also under water. CIC declined to comment.
While new bosses can usually blame their predecessors for problems, the banker said this would be harder in the case of CIC because Mr. Lou is now one of China's most powerful policy makers.
China's top leaders, including Premier Li Keqiang are involved in choosing CIC's chairman, so the reluctant candidates have had to make compelling cases to turn the job down. One of the people familiar with the process said Mr. Tu had argued that he had more work to do transforming Shanghai into a global financial center, a goal that the central government has made a priority.
(Read More: China President Takes Charge of Sweeping Economic Reform Plans)
The leadership vacuum highlights how CIC is at risk of becoming a less central player in China's financial industry. The central bank has created a de facto sovereign wealth fund out of the State Administration of Foreign Exchange, the body which manages the country's $3.4 trillion stockpile of foreign currency holdings. Over the past five years Safe has carved off more cash to invest in stocks, property and private equity funds, covering much of the same territory as CIC.
CIC had a cumulative annualized return of 3.8 percent on its international investments from 2007 until the end of 2011. It has not yet published its detailed 2012 results but has said its performance improved, with a 10.6 percent gain last year, better than the average hedge fund return but less than the rise in the S&P 500 stock index.
(Read More: Yoshikami: Low Cost China Is Old News)
Gao Xiqing, CIC president, has been the fund's acting chief for the past two months and could end up as the default choice for chairman, two people said. Observers credit Mr. Gao with bringing professional investment discipline to CIC, but say an unwillingness to engage in politics has obstructed his promotion.
Established with $200 billion of capital, CIC pushed for a big cash infusion in 2011 when it used up this initial money. In the end it received just $30 billion, less than it expected, partly because of a bureaucratic disagreement. CIC falls under the finance ministry but the central bank is the source of its funding and wanted greater say in its management, people inside CIC have said.
'via Blog this'
Sell-Off Is Clear ‘Warning Shot’ for Nikkei: Pro
Sell-Off Is Clear ‘Warning Shot’ for Nikkei: Pro:
"At 16,000 on the Nikkei, you have really priced in a huge amount of whatever recovery might come," he said, cautioning that the market had gotten far ahead of itself.
According to Jones, it will take 18 months before the positive impact of the massive monetary stimulus announced on April 4 actually shows up in the economy.
He added that the sell-off last week, which resulted in the market's biggest one-day drop in two years on Thursday, was a "warning shot" that money flowing into Japan isn't there for the long haul, and is ready to come out at the first sign of trouble.
"So much can go wrong from a funds flow perspective: when you have a lot of international hot money buying this market in a short space of time, it could just as easily reverse," he said. "As an investor, I would be more comfortable buying Japanese stocks if the rate of returns were much less steep."
Foreign investors have played a central role in driving gains in Japanese equities this year, pumping over $60 billion into the market as of end-April.
(Read More: How Traders Are Playing Turbulent Japan Markets)
Short-Term Correction?
Dhiren Sarin, technical analyst at Barclays, however, believes the long term uptrend in the market is still in place.
"A pullback even towards the 13,000 area would not damage the greater bullish potential. It would bring the market back in pace with a more orderly, rather than accelerating, rise that has been in place since the third quarter 2012 lows," Sarin said.
In the near term, Sarin sees the index headed towards 13,585 – 4 percent lower from current levels.
(Read More: Mammoth Japan Stimulus Still Not Enough: Hayman's Bass)
"This profit taking and sharp setback is largely a result of a crowded market; we are also seeing such signs of profit taking on yen crosses, providing evidence for this short term outlook."
Japan bull Hans Goetti, chief investment officer at Finaport also views the downside in the market as a short term correction.
"There has been some short term technical damage here but as long as the quantitative easing stance by the Bank of Japan isn't changing, we don't change our view on Japanese equities," he said.
However, he cautioned that the biggest risk for the market is Japanese government bond (JGB) yields – which touched a one-year high of 1 percent last week – continuing to rise.
(Read More: Choppy Bond Markets Put Japan Banks on Edge)
"The problem here is what you could have is a crisis of confidence, given the fiscal situation that the Japanese government is in. There could be fears that they will not be able to finance their deficit. That's something we have to watch," Goetti said.
"But for now, central banks have been very good at directing capital into riskier assets – we've seen this in other countries as well. Aggressiveness in Bank of Japan will still lead to higher equity prices in the months ahead," he added.
'via Blog this'
"At 16,000 on the Nikkei, you have really priced in a huge amount of whatever recovery might come," he said, cautioning that the market had gotten far ahead of itself.
According to Jones, it will take 18 months before the positive impact of the massive monetary stimulus announced on April 4 actually shows up in the economy.
He added that the sell-off last week, which resulted in the market's biggest one-day drop in two years on Thursday, was a "warning shot" that money flowing into Japan isn't there for the long haul, and is ready to come out at the first sign of trouble.
"So much can go wrong from a funds flow perspective: when you have a lot of international hot money buying this market in a short space of time, it could just as easily reverse," he said. "As an investor, I would be more comfortable buying Japanese stocks if the rate of returns were much less steep."
Foreign investors have played a central role in driving gains in Japanese equities this year, pumping over $60 billion into the market as of end-April.
(Read More: How Traders Are Playing Turbulent Japan Markets)
Short-Term Correction?
Dhiren Sarin, technical analyst at Barclays, however, believes the long term uptrend in the market is still in place.
"A pullback even towards the 13,000 area would not damage the greater bullish potential. It would bring the market back in pace with a more orderly, rather than accelerating, rise that has been in place since the third quarter 2012 lows," Sarin said.
In the near term, Sarin sees the index headed towards 13,585 – 4 percent lower from current levels.
(Read More: Mammoth Japan Stimulus Still Not Enough: Hayman's Bass)
"This profit taking and sharp setback is largely a result of a crowded market; we are also seeing such signs of profit taking on yen crosses, providing evidence for this short term outlook."
Japan bull Hans Goetti, chief investment officer at Finaport also views the downside in the market as a short term correction.
"There has been some short term technical damage here but as long as the quantitative easing stance by the Bank of Japan isn't changing, we don't change our view on Japanese equities," he said.
However, he cautioned that the biggest risk for the market is Japanese government bond (JGB) yields – which touched a one-year high of 1 percent last week – continuing to rise.
(Read More: Choppy Bond Markets Put Japan Banks on Edge)
"The problem here is what you could have is a crisis of confidence, given the fiscal situation that the Japanese government is in. There could be fears that they will not be able to finance their deficit. That's something we have to watch," Goetti said.
"But for now, central banks have been very good at directing capital into riskier assets – we've seen this in other countries as well. Aggressiveness in Bank of Japan will still lead to higher equity prices in the months ahead," he added.
'via Blog this'
Government Official Blows Parents’ Pension On Stocks
Government Official Blows Parents’ Pension On Stocks:
In May of 2012, the benchmark Shanghai Composite Index began a mini bull run of several consecutive winning days.
“That changed my thinking, and I suddenly wanted into the market. But as I had no real money of my own, I decided that the only way was to put my parents’ pension on the table, which they also agreed to given the bullish market sentiment at the time.”
His original plan was to make just enough for the down payment on his own place and then cash in his chips before returning the original amount to his parents.
“But I lost myself and I got greedy. When the market kept going up day after day, I upped my goal to earning 50,000 yuan before pulling up stakes, and this quickly was reset to 100,000.”
Our unlucky investor’s travails are regrettable, but also understandable given the temptation to make a quick buck to cover soaring costs of living.
China shares are currently down around 5% from year-earlier levels and were flirting with a 20% decline late last year, so from a market perspective it is easy to see how a few poor picks could lead to his parents’ pension drying up rather quickly
'via Blog this'
In May of 2012, the benchmark Shanghai Composite Index began a mini bull run of several consecutive winning days.
“That changed my thinking, and I suddenly wanted into the market. But as I had no real money of my own, I decided that the only way was to put my parents’ pension on the table, which they also agreed to given the bullish market sentiment at the time.”
His original plan was to make just enough for the down payment on his own place and then cash in his chips before returning the original amount to his parents.
“But I lost myself and I got greedy. When the market kept going up day after day, I upped my goal to earning 50,000 yuan before pulling up stakes, and this quickly was reset to 100,000.”
Our unlucky investor’s travails are regrettable, but also understandable given the temptation to make a quick buck to cover soaring costs of living.
China shares are currently down around 5% from year-earlier levels and were flirting with a 20% decline late last year, so from a market perspective it is easy to see how a few poor picks could lead to his parents’ pension drying up rather quickly
'via Blog this'
Saturday, May 25, 2013
Friday, May 24, 2013
Economics Lessons China and Brazil Can Teach Each Other
Economics Lessons China and Brazil Can Teach Each Other: ""Brazilian households spend roughly a fifth of their income servicing debt – far more than overleveraged U.S. households did before the financial crisis. This debt burden has understandably started to take a toll on their spending," he said. U.S. consumer debt servicing reached 14 percent of income in 2007, the peak of the housing boom."
"Credit cannot continue to be a driver of Brazil's growth. Banks like Caixa bank have been lending massively to the housing sector and there is evidence of a housing bubble. Defaults are on the rise and consumer confidence is declining. What we are seeing is credit-fueled growth starting to reach its limits – it is unsustainable," Shearing told CNBC on Tuesday.
"Looking ahead, it needs to rebalance away from consumption, and towards investment. But this will require structural reforms, in particular to raise domestic savings, which will prove unpopular, and are unlikely at least until next year's elections are out of the way," he said.
In contrast, over-investment remains a problem in China, in Shearing's opinion.
"China's new leadership has made a great deal of the need to push through significant economic reforms to reorient the economy towards consumer spending, in order to secure sustainable and strong growth over the medium term. But that is easier said than done," he said.
"Looking ahead, it needs to rebalance away from consumption, and towards investment. But this will require structural reforms, in particular to raise domestic savings, which will prove unpopular, and are unlikely at least until next year's elections are out of the way," he said.
In contrast, over-investment remains a problem in China, in Shearing's opinion.
"China's new leadership has made a great deal of the need to push through significant economic reforms to reorient the economy towards consumer spending, in order to secure sustainable and strong growth over the medium term. But that is easier said than done," he said.
"One region on which we are particularly upbeat is Africa. Here, rapid economic growth has been made possible by greater political stability… We are also optimistic on the prospects for much of South East Asia – including Indonesia and in particular, the Philippines. Elsewhere, we are also fairly bullish on the outlook for Mexico," he said.
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"Credit cannot continue to be a driver of Brazil's growth. Banks like Caixa bank have been lending massively to the housing sector and there is evidence of a housing bubble. Defaults are on the rise and consumer confidence is declining. What we are seeing is credit-fueled growth starting to reach its limits – it is unsustainable," Shearing told CNBC on Tuesday.
"Looking ahead, it needs to rebalance away from consumption, and towards investment. But this will require structural reforms, in particular to raise domestic savings, which will prove unpopular, and are unlikely at least until next year's elections are out of the way," he said.
In contrast, over-investment remains a problem in China, in Shearing's opinion.
"China's new leadership has made a great deal of the need to push through significant economic reforms to reorient the economy towards consumer spending, in order to secure sustainable and strong growth over the medium term. But that is easier said than done," he said.
"Looking ahead, it needs to rebalance away from consumption, and towards investment. But this will require structural reforms, in particular to raise domestic savings, which will prove unpopular, and are unlikely at least until next year's elections are out of the way," he said.
In contrast, over-investment remains a problem in China, in Shearing's opinion.
"China's new leadership has made a great deal of the need to push through significant economic reforms to reorient the economy towards consumer spending, in order to secure sustainable and strong growth over the medium term. But that is easier said than done," he said.
"One region on which we are particularly upbeat is Africa. Here, rapid economic growth has been made possible by greater political stability… We are also optimistic on the prospects for much of South East Asia – including Indonesia and in particular, the Philippines. Elsewhere, we are also fairly bullish on the outlook for Mexico," he said.
'via Blog this'
What Central Bankers Can Learn From Volatile Markets
What Central Bankers Can Learn From Volatile Markets: ""You need a lot more communication from central banks when bond yields rise because yields are always going to rise with the announcement of QE because people are going to sell," said Goldman at Kapstream."
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The Week Ahead: Watching for Signs of a Too-Strong Economy
The Week Ahead: Watching for Signs of a Too-Strong Economy: ""CNBC always jokes about how every jobs report is the most important jobs report, but this is the most important jobs report we've seen in a long time," said Daniel Greenhaus, chief global strategist at BTIG (and CNBC contributor). "I'm not saying it will be, but if it comes in at 275,000, it's game over." "
"We're at the home stretch and that's why this vacuum between now and the nonfarm payrolls is going to be a dripless market for bonds and equities," said George Goncalves, Treasury strategist at Nomura Americas. "The assumption is things are going to get better. What if it's a weak number? Can we actually talk about not tapering? We're on edge about everything."
"The NFP (nonfarm payrolls) is what I'm hanging my hat on. If the NFP is strong, the Fed could think about bringing it forward, but even June is too soon," he said. "The chairman himself said the markets have the same data we have. They are going to make a decision on fundamentals and targets. If they're stopping QE, it's because they feel comfortable for the outlook for the economy, and that should not be viewed as a bad thing."
"It doesn't last forever, but it goes until it doesn't anymore," said Doll. "My view is let's not try to make something too complicated. Let's recognize that the economy is improving fast enough for stocks to be satisfied but slow enough that the Fed stays dovish."
ames Paulsen, a long-time bull, said the current environment is making him a little cautious. The Wells Capital Management strategist said an improving economy could keep rates moving higher, and that could pressure stocks. The 10-year note broke above 2 percent this past week for the first time since March.
Paulsen, too, is watching claims data, after the past week's claims fell by 23,000 to 340,000, and the continuing claims declined by 112,000 to 2.9 million during the week ending May 11, in the largest decline in more than a year and the lowest level since before the financial crisis. The claims are for the week ending May 18, which is the survey week for the May employment report. Economists were watching them closely, and JPMorgan economists said while they expect payroll growth to be slower in the second quarter than first quarter because of fiscal tightening, the claims are indicating the weakness in labor might not be that severe.
"If claims keep falling toward 300,000, QE is over," said Paulsen. "I just think if you get a (monthly jobs) number closing in on 200,000 again, I think the discussion within the Fed will definitely go toward tapering. I think it's very encouraging that the Depression scaredy-cat Fed is actually starting to talk about normalizing policy. … I think China is a more frightening thing. I'd like to see them regain footing. I'm not sure the market is really that worried about the Fed going away from QE. There's been more discussion this year about the Fed tapering QE than at any other point."
Paulsen said he still expects the market to move a bit higher, but it should be more of a sideways move for much of the second half of the year, consolidating before moving higher later.
"The Chinese economy is an issue. I think the global recovery can go on without Europe. It can go on without Japan. It could conceivably go on without the United States, but it cannot go on without the emerging world," he said, adding China is in the process of adjusting to a slower growth rate. "I'm not over the top on it because I think there's growth in other parts of the world, but it's a little concerning."
But U.S. growth is improving and that should help stocks. Paulsen doesn't buy that it's the Fed that's pushed up the market, in contrast to other analysts and traders.
"Stocks are going to have a hard time for the rest of the year because bond yields are going to keep rising," he said. "I think that people are underestimating economic growth and sustainability. It's going to be hard for this thing to fall if we're going to grow closer to 3 than 2 percent for the second half."
Many analysts had expected a "Sell in May" market this year, since that had been the pattern of the last several years, and they had expected the economy to be pressured by sequestration and other federal budget cuts. While manufacturing data is running soft, the impact so far has not been as bad as some expected. Housing has been a bright spot, with existing home sales continuing to improve in April to the highest level in 3 1/2 years.
Doll also sees the improving economy lifting stocks, but with help from the Fed. "It's far more than the Fed. The economy is improving. We have modest improvement, modest earnings growth. We're not going to get a robust economy. That's precisely the good news for the stock market. My view is an acceptable economy is best for the stock market. If you get a strong economy, the Fed will disappear and we'll get inflation. Right now, we're in the sweet spot," he said.
What Else to Watch
Stock traders will also be watching bonds in the coming week, as the Treasury auctions $99 billion in two-year, five-year and seven-year notes Tuesday through Thursday.
"Given the sharp rise in yields, we would expect they'll be well-subscribed. May is a unique month. There's usually a bid for index buying," Goncalves of Nomura Americas said.
Rates can go higher, he said, but not much without more proof that the economy is improving. "Rates won't go higher just because the Fed stops. If the Fed stops too early, rates will go lower," he said.
Paulsen said rising rates could slow stocks as they adjust, but will not stop the market from going higher. He said based on history, it would take a level above 4 percent to stop stocks from rising.
The Week Ahead
Monday
Memorial Day; U.S. Markets Closed
Tuesday
9:00 am: S&P/Case-Shiller home price data
10:00 am: Consumer confidence
10:00 am: Richmond Fed
10:30 am: Dallas Fed
1:00 pm: $35 billion two-year note auction
Wednesday
1:00 pm: $35 billion five-year note auction
Thursday
8:30 am: Weekly jobless claims
8:30 am: Real first-quarter GDP (second)
1:00 pm: $29 billion seven-year note auction
Friday
8:30 am: Personal income
9:45 am: Chicago PMI
9:55 am: Consumer sentiment
'via Blog this'
"We're at the home stretch and that's why this vacuum between now and the nonfarm payrolls is going to be a dripless market for bonds and equities," said George Goncalves, Treasury strategist at Nomura Americas. "The assumption is things are going to get better. What if it's a weak number? Can we actually talk about not tapering? We're on edge about everything."
"The NFP (nonfarm payrolls) is what I'm hanging my hat on. If the NFP is strong, the Fed could think about bringing it forward, but even June is too soon," he said. "The chairman himself said the markets have the same data we have. They are going to make a decision on fundamentals and targets. If they're stopping QE, it's because they feel comfortable for the outlook for the economy, and that should not be viewed as a bad thing."
"It doesn't last forever, but it goes until it doesn't anymore," said Doll. "My view is let's not try to make something too complicated. Let's recognize that the economy is improving fast enough for stocks to be satisfied but slow enough that the Fed stays dovish."
ames Paulsen, a long-time bull, said the current environment is making him a little cautious. The Wells Capital Management strategist said an improving economy could keep rates moving higher, and that could pressure stocks. The 10-year note broke above 2 percent this past week for the first time since March.
Paulsen, too, is watching claims data, after the past week's claims fell by 23,000 to 340,000, and the continuing claims declined by 112,000 to 2.9 million during the week ending May 11, in the largest decline in more than a year and the lowest level since before the financial crisis. The claims are for the week ending May 18, which is the survey week for the May employment report. Economists were watching them closely, and JPMorgan economists said while they expect payroll growth to be slower in the second quarter than first quarter because of fiscal tightening, the claims are indicating the weakness in labor might not be that severe.
"If claims keep falling toward 300,000, QE is over," said Paulsen. "I just think if you get a (monthly jobs) number closing in on 200,000 again, I think the discussion within the Fed will definitely go toward tapering. I think it's very encouraging that the Depression scaredy-cat Fed is actually starting to talk about normalizing policy. … I think China is a more frightening thing. I'd like to see them regain footing. I'm not sure the market is really that worried about the Fed going away from QE. There's been more discussion this year about the Fed tapering QE than at any other point."
Paulsen said he still expects the market to move a bit higher, but it should be more of a sideways move for much of the second half of the year, consolidating before moving higher later.
"The Chinese economy is an issue. I think the global recovery can go on without Europe. It can go on without Japan. It could conceivably go on without the United States, but it cannot go on without the emerging world," he said, adding China is in the process of adjusting to a slower growth rate. "I'm not over the top on it because I think there's growth in other parts of the world, but it's a little concerning."
But U.S. growth is improving and that should help stocks. Paulsen doesn't buy that it's the Fed that's pushed up the market, in contrast to other analysts and traders.
"Stocks are going to have a hard time for the rest of the year because bond yields are going to keep rising," he said. "I think that people are underestimating economic growth and sustainability. It's going to be hard for this thing to fall if we're going to grow closer to 3 than 2 percent for the second half."
Many analysts had expected a "Sell in May" market this year, since that had been the pattern of the last several years, and they had expected the economy to be pressured by sequestration and other federal budget cuts. While manufacturing data is running soft, the impact so far has not been as bad as some expected. Housing has been a bright spot, with existing home sales continuing to improve in April to the highest level in 3 1/2 years.
Doll also sees the improving economy lifting stocks, but with help from the Fed. "It's far more than the Fed. The economy is improving. We have modest improvement, modest earnings growth. We're not going to get a robust economy. That's precisely the good news for the stock market. My view is an acceptable economy is best for the stock market. If you get a strong economy, the Fed will disappear and we'll get inflation. Right now, we're in the sweet spot," he said.
What Else to Watch
Stock traders will also be watching bonds in the coming week, as the Treasury auctions $99 billion in two-year, five-year and seven-year notes Tuesday through Thursday.
"Given the sharp rise in yields, we would expect they'll be well-subscribed. May is a unique month. There's usually a bid for index buying," Goncalves of Nomura Americas said.
Rates can go higher, he said, but not much without more proof that the economy is improving. "Rates won't go higher just because the Fed stops. If the Fed stops too early, rates will go lower," he said.
Paulsen said rising rates could slow stocks as they adjust, but will not stop the market from going higher. He said based on history, it would take a level above 4 percent to stop stocks from rising.
The Week Ahead
Monday
Memorial Day; U.S. Markets Closed
Tuesday
9:00 am: S&P/Case-Shiller home price data
10:00 am: Consumer confidence
10:00 am: Richmond Fed
10:30 am: Dallas Fed
1:00 pm: $35 billion two-year note auction
Wednesday
1:00 pm: $35 billion five-year note auction
Thursday
8:30 am: Weekly jobless claims
8:30 am: Real first-quarter GDP (second)
1:00 pm: $29 billion seven-year note auction
Friday
8:30 am: Personal income
9:45 am: Chicago PMI
9:55 am: Consumer sentiment
'via Blog this'
Gold Set to Shine Again: Pro
Gold Set to Shine Again: Pro: "Continued quantitative easing will be supportive of gold, Francisco Blanch of Bank of America Merrill Lynch Global Research said Thursday.
"The bounce in gold overnight kind of shows that if we have a bad equity market movement, whether it's Japan or somewhere else, investors are going to get back to gold," he said. "I think that's the main point that we've learned over the last 24 hours.""
'via Blog this'
"The bounce in gold overnight kind of shows that if we have a bad equity market movement, whether it's Japan or somewhere else, investors are going to get back to gold," he said. "I think that's the main point that we've learned over the last 24 hours.""
'via Blog this'
Warning Signs: What Investors Missed Ahead of ‘Brutal’ Nikkei Sell-Off
Warning Signs: What Investors Missed Ahead of ‘Brutal’ Nikkei Sell-Off: ""The Mothers Index started misbehaving on the eighth and then fell even further on the fourteenth. It is a very volatile index so a 10 percent fall isn't headline news, but the two falls in quick succession looked more meaningful," he said.
"We scaled back our overweight when we saw the Mothers Index selling off quite dramatically. We still like Japan, but we are a bit more cautious. Those sorts of rallies are unsustainable," he said."
'via Blog this'
"We scaled back our overweight when we saw the Mothers Index selling off quite dramatically. We still like Japan, but we are a bit more cautious. Those sorts of rallies are unsustainable," he said."
'via Blog this'
Warning Signs: What Investors Missed Ahead of ‘Brutal’ Nikkei Sell-Off
Warning Signs: What Investors Missed Ahead of ‘Brutal’ Nikkei Sell-Off: ""The Mothers Index started misbehaving on the eighth and then fell even further on the fourteenth. It is a very volatile index so a 10 percent fall isn't headline news, but the two falls in quick succession looked more meaningful," he said.
"We scaled back our overweight when we saw the Mothers Index selling off quite dramatically. We still like Japan, but we are a bit more cautious. Those sorts of rallies are unsustainable," he said."
'via Blog this'
"We scaled back our overweight when we saw the Mothers Index selling off quite dramatically. We still like Japan, but we are a bit more cautious. Those sorts of rallies are unsustainable," he said."
'via Blog this'
Outlook for China’s Economy Just Keeps Getting Worse
Outlook for China’s Economy Just Keeps Getting Worse: "A Wall Street Journal poll of 12 banks published last week showed of the major lenders, HSBC has the highest growth forecast for China at 8.2 percent for 2013, while Societe Generale, by contrast, has the most bearish view on the economy, projecting 7.4 percent growth this year. The median forecast was 7.8 percent."
'via Blog this'
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Sony to Tap Consumers in $1.5 Billion Bond
Sony to Tap Consumers in $1.5 Billion Bond: "Sony said Friday it will issue its first ever bond aimed at individual investors to raise 150 billion yen ($1.48 billion).
(Read More: Japan Bond Yields Spike — 10-Year Hits 1%)
Most of the proceeds will be used to roll over 110 billion yen of debt due for repayment at the end of the year, with the remainder to be used to invest in plant and equipment.
"The bond is primarily for maintaining financial stability," Sony spokeswoman Yuki Shima said. She declined to give details of how the remaining 40 billion yen would be invested."
'via Blog this'
(Read More: Japan Bond Yields Spike — 10-Year Hits 1%)
Most of the proceeds will be used to roll over 110 billion yen of debt due for repayment at the end of the year, with the remainder to be used to invest in plant and equipment.
"The bond is primarily for maintaining financial stability," Sony spokeswoman Yuki Shima said. She declined to give details of how the remaining 40 billion yen would be invested."
'via Blog this'
Japan Bulls Unwavered by Stock Market Rout
Japan Bulls Unwavered by Stock Market Rout: ""The market was very right for a correction. [But] longer term there is a lot of potential in Japan. Obviously markets don't move in a straight line," David Dietze, president and chief investment strategist at Point View Wealth Management told CNBC on Friday. "Realistically, we were seeing signs all along that were over bearish the Japanese yen and bullish on the Nikkei. I view this as a healthy correction in Japanese equities and the currency," David Rodriguez, quantitative strategist at DailyFX said, referring to the fall in dollar-yen to a two-week low of 100.83 on Thursday.
'via Blog this'
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'It's a Big Moment for Japan': Fed's Bullard
'It's a Big Moment for Japan': Fed's Bullard: ""I wouldn't be surprised with that kind of action over that kind of timeframe that you're going to get some volatility," Bullard said Friday.""It is a big moment for Japan," Bullard said. "Any time you see any market in the world go up by this amount in six months, you are bound to see volatility in the trading. More volatility if it was a stable market that hadn't moved at all."
'via Blog this'
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Thursday, May 23, 2013
China shopping malls to be more profitable than office space: ARA | South China Morning Post
China shopping malls to be more profitable than office space: ARA | South China Morning Post:
Shopping malls will surpass office and residential space as the most profitable type of property investment on the mainland over the next two to five years, thanks to the nation's booming middle class and its fast-growing income, says ARA Asset Management, a property investment firm partly owned by Li Ka-shing.
"District shopping centres with a gross floor area of one million square feet or bigger, and a high [number of visitors] will offer the biggest upside with limited risks for private funds in the coming years on the mainland," said Ng Beng Tiong, the chief executive of ARA Private Funds.
Ng, a former investment banker, is targeting an internal rate of return of 20 per cent with the building and operating of shopping centres on the mainland through the newly raised US$441 million of Asia Dragon Fund II.
HSBC forecasts that 93 million Chinese households will join the middle class by 2015.
The China Chain Store and Franchise Association expects the number of mainland malls to jump 40 per cent to more than 4,000 by 2015.
Not all of the new malls would provide decent returns, so real estate funds would have to be selective, Ng said, warning that the presence of luxury brands did not guarantee fat margins.
"We don't go for malls that are full of Guccis and LVs (LVMH luxury goods), but the ones that serve the daily needs of a large catchment of residents and office workers," Ng said, citing Asia Dragon Fund I's Dalian shopping mall and Festival Walk in Kowloon Tong as examples.
Of the two private funds that closed last year, Ng plans to invest up to 70 per cent of the US$441 million Asia Dragon Fund II on the mainland, of which more than half will go to shopping malls that serve the growing middle class.
"It is the middle-income group that is growing faster in terms of their wealth and buying power, which translates into very strong fundamental support for shopping malls", he said.
The firm, in which Cheung Kong holds a 14 per cent stake, is looking to expand its footprint to key tier-two cities, such as Hangzhou, Suzhou, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan. It already has projects under way in Shanghai, Beijing, Dalian and Nanjing.
By 2015, the retail market will double in key tier-two cities, according to HSBC research, and shopping malls will account for 74 per cent of the retail market in these cities, up from 51 per cent currently.
This article first appeared in the South China Morning Post print edition on May 22, 2013 as Mainland malls more profitable, says ARA
'via Blog this'
Shopping malls will surpass office and residential space as the most profitable type of property investment on the mainland over the next two to five years, thanks to the nation's booming middle class and its fast-growing income, says ARA Asset Management, a property investment firm partly owned by Li Ka-shing.
"District shopping centres with a gross floor area of one million square feet or bigger, and a high [number of visitors] will offer the biggest upside with limited risks for private funds in the coming years on the mainland," said Ng Beng Tiong, the chief executive of ARA Private Funds.
Ng, a former investment banker, is targeting an internal rate of return of 20 per cent with the building and operating of shopping centres on the mainland through the newly raised US$441 million of Asia Dragon Fund II.
HSBC forecasts that 93 million Chinese households will join the middle class by 2015.
The China Chain Store and Franchise Association expects the number of mainland malls to jump 40 per cent to more than 4,000 by 2015.
Not all of the new malls would provide decent returns, so real estate funds would have to be selective, Ng said, warning that the presence of luxury brands did not guarantee fat margins.
"We don't go for malls that are full of Guccis and LVs (LVMH luxury goods), but the ones that serve the daily needs of a large catchment of residents and office workers," Ng said, citing Asia Dragon Fund I's Dalian shopping mall and Festival Walk in Kowloon Tong as examples.
Of the two private funds that closed last year, Ng plans to invest up to 70 per cent of the US$441 million Asia Dragon Fund II on the mainland, of which more than half will go to shopping malls that serve the growing middle class.
"It is the middle-income group that is growing faster in terms of their wealth and buying power, which translates into very strong fundamental support for shopping malls", he said.
The firm, in which Cheung Kong holds a 14 per cent stake, is looking to expand its footprint to key tier-two cities, such as Hangzhou, Suzhou, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan. It already has projects under way in Shanghai, Beijing, Dalian and Nanjing.
By 2015, the retail market will double in key tier-two cities, according to HSBC research, and shopping malls will account for 74 per cent of the retail market in these cities, up from 51 per cent currently.
This article first appeared in the South China Morning Post print edition on May 22, 2013 as Mainland malls more profitable, says ARA
'via Blog this'
ANWELL: Will 2013 see finale of solar industry consolidation?
ANWELL: Will 2013 see finale of solar industry consolidation?:
THE PAST TWO YEARS have not been easy for the solar panel industry as a capacity glut made many manufacturers unprofitable but for Anwell Technologies, it was also a time of extending its market reach.
The industry has no lack of high-profile casualties.
A recent example is the incumbent world no.1 manufacturer Suntech Power, which filed for bankruptcy two months after defaulting on US$541 million of bonds.
Its collapse follows bankruptcies in Germany of manufacturers such as Q-Cells SE, previously the biggest solar manufacturer. Japan’s Sharp, which led solar cell making until 2006, has been scaling back operations overseas.
And in 2011, Solyndra LLC collapsed in spite of US$535 million of support from the U.S. Energy Department.
SGX-listed Anwell, with Chinese government subsidies of HK$1.7 billion on its books, widened its 1Q2013 net loss attributable to shareholders to HK$117.7 million compared to HK$93.6 million in the corresponding period a year ago.
Anwell’s revenue for 1Q2013 declined 22.9% year-on-year to HK$242.6 million due to lower sales for all 3 business segments: solar, optical disc and equipment.Its gross profit margins dropped by 5.1 percentage points to 11.5% due to a fall in average selling prices for optical disc and solar products.
"1Q2013 may have been the perfect storm when demand and prices fell for both solar and optical disc products, but there’s good news: While solar panel prices have fallen over 20% last year, industry players and Anwell executive director Ken Wu share the belief that 2013 will likely mark the finale of the solar industry consolidation."
Solar panel prices are expected to improve after excess inventory is absorbed over the next two quarters,” said Mr Wu during a recent teleconference with Singapore-based analysts.
That's saying a lot, considering that solar panel prices have dropped some 80% over the past 5 years.
Higher efficiency products, more markets
Its upcoming solar panel plant in Dongguan commences operations next month.
This is its second solar panel manufacturing plant, able to produce 1500 MW of high-efficiency low-cost thin film photovoltaic (PV) modules a year.
”The amorphous silicon thin-film solar products from our Henan plant have solar-to-electricity conversion efficiency averaging 9%. These are lower-cost products that are suitable for utility-scale markets like Thailand and India,” said Mr Wu.
"Our Dongguan plant also produces thin-film solar products, but structurally different and with higher energy conversion efficiency of up to 13%. This is suitable for Australian and Europe markets, and for the rooftop market.
“Currently, we trade in third-party PV products in Australia and Europe, and this limits our profit margin in these markets to that of a trading business,” he said.
“When the Dongguan plant starts operating, we can generate a manufacturer’s profit margin from Australia and Europe, which will be better than trading,” he added.
Mr Wu hopes to supply the company's higher efficiency products to the Aussie and European rooftop market, where solar panel systems on the rooftops of residential and commercial buildings are connected to a power grid that delivers electricity to end consumers.
The rooftop solar panel market has been fueled by ”feed-in-tariffs”, a government policy mechanism designed to accelerate investment in renewable energy technologies.
Feed-in-tariffs typically include three key provisions: guaranteed power grid access, long-term contracts for the electricity produced, and purchase prices based on the cost of generation.
Over 50 countries have adopted similar schemes to promote the use of solar energy, whereby eligible homeowners, business owners, farmers, as well as private investors are paid a cost-based price for the renewable electricity they produce. This arrangement provides payback for those who invest in a PV system.
Foray into Japanese market
A new market that it is targeting is Japan, where feed-in-tariffs have been fueling a solar power boom.
Last July, the Japanese government began offering generous feed-in tariff incentives to encourage investments in energy sources such as wind and solar. Renewable energy has become a big thing in Japan as it grappled with power shortage problems after its nuclear power accident two years ago prompted the closure of all but two of its nuclear reactors.
The feed-in-tariff scheme was so effective that Japan is expected to become the largest solar market in the world after China this year, boosted by an incentive program that offers one of the best rates in the world for energy from renewable sources.
”There are many power purchase agreements in the Japanese market and many investors are looking for opportunities there. We are bringing investors from Hong Kong, America and Thailand to invest in solar farms in Japan, where we will be their EPC contractor,” said Mr Wu.
“Other than venturing into Japan, we will continue to focus on China and Thailand as markets for solar farm projects in the upcoming quarters. We also have a distribution business in the rooftop markets in Europe, South America and Australia,” he added.
Q: Are you replicating your Thailand business model for your venture into Japan?
Yes, we are replicating our Thai model in Japan.
We were the EPC contractor for our first project in Thailand. For our second project there, we extended our capabilities to that of a solar farm developer. This means that in addition to building the farm for our customer, we also acquired the necessary licenses, and lined up the bank financing and investors.
We know many investors in Thai solar farms who are looking for opportunities to invest because of their good experience in this area in the past two years. However, the Thai authorities have not been issuing any power purchase agreement in the past 6 months. So, we intend to bring Japanese solar farm projects of comparable IRR to these Thai investors.
Q: How does your selling price change with your new product range of 13% solar-to-electricity efficiency?
The product range from our second factory will be of higher efficiency, and each solar panel can generate a higher electrical voltage. The panels from our Dongguan plant will enhance our product mix.
Q: Will the seasonal weakness for optical discs persist? What causes it?
We have seen a downward trend for gross profit margin of optical discs for the past 3 quarters. I believe the current margins will persist into 2Q2013 and rebound thereafter. Current margins are quite low in the context of the optical disc industry’s historical cycles. I expect improvement in 3Q and 4Q2013.
Q: Your main banker is the Industrial and Commercial Bank of China (ICBC). What do they say when they see your losses?
Bankers in China have mindsets different from those in Singapore or Hong Kong. They are highly influenced by government policies. ICBC is partially state-owned. Up to today, they are still supporting us. They know our company very well. They even visit our projects in Europe to understand us. We maintain very good communications with them. Our losses have not affected the banking terms that they are extending to us.
'via Blog this'
THE PAST TWO YEARS have not been easy for the solar panel industry as a capacity glut made many manufacturers unprofitable but for Anwell Technologies, it was also a time of extending its market reach.
The industry has no lack of high-profile casualties.
A recent example is the incumbent world no.1 manufacturer Suntech Power, which filed for bankruptcy two months after defaulting on US$541 million of bonds.
Its collapse follows bankruptcies in Germany of manufacturers such as Q-Cells SE, previously the biggest solar manufacturer. Japan’s Sharp, which led solar cell making until 2006, has been scaling back operations overseas.
And in 2011, Solyndra LLC collapsed in spite of US$535 million of support from the U.S. Energy Department.
SGX-listed Anwell, with Chinese government subsidies of HK$1.7 billion on its books, widened its 1Q2013 net loss attributable to shareholders to HK$117.7 million compared to HK$93.6 million in the corresponding period a year ago.
Anwell’s revenue for 1Q2013 declined 22.9% year-on-year to HK$242.6 million due to lower sales for all 3 business segments: solar, optical disc and equipment.
"1Q2013 may have been the perfect storm when demand and prices fell for both solar and optical disc products, but there’s good news: While solar panel prices have fallen over 20% last year, industry players and Anwell executive director Ken Wu share the belief that 2013 will likely mark the finale of the solar industry consolidation."
Solar panel prices are expected to improve after excess inventory is absorbed over the next two quarters,” said Mr Wu during a recent teleconference with Singapore-based analysts.
That's saying a lot, considering that solar panel prices have dropped some 80% over the past 5 years.
Higher efficiency products, more markets
Its upcoming solar panel plant in Dongguan commences operations next month.
This is its second solar panel manufacturing plant, able to produce 1500 MW of high-efficiency low-cost thin film photovoltaic (PV) modules a year.
”The amorphous silicon thin-film solar products from our Henan plant have solar-to-electricity conversion efficiency averaging 9%. These are lower-cost products that are suitable for utility-scale markets like Thailand and India,” said Mr Wu.
"Our Dongguan plant also produces thin-film solar products, but structurally different and with higher energy conversion efficiency of up to 13%. This is suitable for Australian and Europe markets, and for the rooftop market.
“Currently, we trade in third-party PV products in Australia and Europe, and this limits our profit margin in these markets to that of a trading business,” he said.
“When the Dongguan plant starts operating, we can generate a manufacturer’s profit margin from Australia and Europe, which will be better than trading,” he added.
Mr Wu hopes to supply the company's higher efficiency products to the Aussie and European rooftop market, where solar panel systems on the rooftops of residential and commercial buildings are connected to a power grid that delivers electricity to end consumers.
The rooftop solar panel market has been fueled by ”feed-in-tariffs”, a government policy mechanism designed to accelerate investment in renewable energy technologies.
Feed-in-tariffs typically include three key provisions: guaranteed power grid access, long-term contracts for the electricity produced, and purchase prices based on the cost of generation.
Over 50 countries have adopted similar schemes to promote the use of solar energy, whereby eligible homeowners, business owners, farmers, as well as private investors are paid a cost-based price for the renewable electricity they produce. This arrangement provides payback for those who invest in a PV system.
Foray into Japanese market
A new market that it is targeting is Japan, where feed-in-tariffs have been fueling a solar power boom.
Last July, the Japanese government began offering generous feed-in tariff incentives to encourage investments in energy sources such as wind and solar. Renewable energy has become a big thing in Japan as it grappled with power shortage problems after its nuclear power accident two years ago prompted the closure of all but two of its nuclear reactors.
The feed-in-tariff scheme was so effective that Japan is expected to become the largest solar market in the world after China this year, boosted by an incentive program that offers one of the best rates in the world for energy from renewable sources.
”There are many power purchase agreements in the Japanese market and many investors are looking for opportunities there. We are bringing investors from Hong Kong, America and Thailand to invest in solar farms in Japan, where we will be their EPC contractor,” said Mr Wu.
“Other than venturing into Japan, we will continue to focus on China and Thailand as markets for solar farm projects in the upcoming quarters. We also have a distribution business in the rooftop markets in Europe, South America and Australia,” he added.
Q: Are you replicating your Thailand business model for your venture into Japan?
Yes, we are replicating our Thai model in Japan.
We were the EPC contractor for our first project in Thailand. For our second project there, we extended our capabilities to that of a solar farm developer. This means that in addition to building the farm for our customer, we also acquired the necessary licenses, and lined up the bank financing and investors.
We know many investors in Thai solar farms who are looking for opportunities to invest because of their good experience in this area in the past two years. However, the Thai authorities have not been issuing any power purchase agreement in the past 6 months. So, we intend to bring Japanese solar farm projects of comparable IRR to these Thai investors.
Q: How does your selling price change with your new product range of 13% solar-to-electricity efficiency?
The product range from our second factory will be of higher efficiency, and each solar panel can generate a higher electrical voltage. The panels from our Dongguan plant will enhance our product mix.
Q: Will the seasonal weakness for optical discs persist? What causes it?
We have seen a downward trend for gross profit margin of optical discs for the past 3 quarters. I believe the current margins will persist into 2Q2013 and rebound thereafter. Current margins are quite low in the context of the optical disc industry’s historical cycles. I expect improvement in 3Q and 4Q2013.
Q: Your main banker is the Industrial and Commercial Bank of China (ICBC). What do they say when they see your losses?
Bankers in China have mindsets different from those in Singapore or Hong Kong. They are highly influenced by government policies. ICBC is partially state-owned. Up to today, they are still supporting us. They know our company very well. They even visit our projects in Europe to understand us. We maintain very good communications with them. Our losses have not affected the banking terms that they are extending to us.
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