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Asia watching for Japan GDP, China tech earnings
LOS ANGELES (MarketWatch) — Asian investors will get a couple of key updates in the coming week on how Japan’s recovery from the devastating March 11 earthquake is going, with Tokyo set to release some important economic data.
Japanese gross domestic product numbers for the April-June quarter are due out Monday, and while almost all economists expect the data to show a contraction, they vary widely on how bad the hit will be.
A key consideration will be whether the economy shrank more than the revised 3.5% drop in January-March period.
A Dow Jones Newswires survey yielded forecasts ranging from a 1.4% contraction to a heavy 4.7% plunge, with the median projection for a fall of 2.7%.
For article GO HERE
Japan Slashes GDP Forecast
Japan cut its growth forecast for this year after a record earthquake disrupted output and depressed consumer spending.
Gross domestic product will increase 0.5 percent in the year started April 1, compared with a January forecast for a 1.5 percent expansion, the Cabinet Office said in Tokyo today. GDP will increase 2.7 percent to 2.9 percent in the following year as the nation rebuilds from the March 11 catastrophe, according to the report.
For article GO HERE
Bad News From Hong Kong And Singapore
Aug. 14, 2011, 9:00 AM
Looking for contraction? Look no further than the booming city-states of east Asia.
Earlier this week, Singapore clocked in with a 6.5% decline in Q2 GDP. Of course Singapore's GDP is famously volatile, as that number follows 27.2% growth in the previous quarter! Still it's a little worrisome that the contraction is owed in part to weak demand for some key exports, such as semiconductors.
Meanwhile, Hong Kong's GDP shrank by 0.5% in Q2. That's well below the 0.7% growth that analysts had expected, according to WSJ.
For article GO HERE
Is There Enough Money on Earth to Save the Banks?
As was noted in the new film Anima Mundi, Mother Earth cannot afford to repay mankind's debts. And as I said so clearly in Collapse, "Money is only a symbol. Without energy (and resorces) money is useless." - MCR
Aug 11, 2011 12:00 PM GMT+1200
Forget free-market fundamentals. What matters most to the capital markets now is whether the governments of the U.S. and western Europe have the will and the wherewithal to save the global financial system from disaster yet again.
A healthy climate for the efficient allocation of capital, this is not.
By pledging to keep its benchmark interest rate near zero through at least mid-2013, the Federal Reserve succeeded (for a couple of hours) in propping up U.S. stock markets after two days of gut-wrenching declines, especially in financial stocks. The news came a day after the European Central Bank embraced the role of savior by buying sovereign debt of Italy and Spain, sending yields on those countries’ bonds plunging and offering respite to financial institutions that hold them.
The notion that the world’s governments won’t permit an economic meltdown seemed to be operative, less than two weeks after the U.S. Congress threatened to torch the nation’s full faith and credit. Then yesterday the equities markets fell out of bed again. The open question is how long investor confidence in the policy makers’ powers can last.
This has added relevance in light of one of the developments that sent Bank of America Corp. (BAC)’s stock down 20 percent Aug. 8 -- the news that American International Group Inc. (AIG) had accused the company of securities fraud in a lawsuit seeking more than $10 billion. Naturally the question arises: Didn’t AIG consult with anyone at the Treasury Department, which owns 76.7 percent of AIG, about whether to fire this market- sinking torpedo at a too-big-to-fail bank so soon after Standard & Poor’s downgraded the U.S. credit rating?
Bailouts at War
It would seem not. A Treasury spokesman, Mark Paustenbach, said: “As per our stated principles, Treasury does not interfere with the day-to-day management of the company.” Just when you think the government might have matters under control, we find out it can’t even keep a bailed-out company it controls from trying to blow up Bank of America, which itself needed federal bailout money to stay afloat.
One thing that’s certain is that investors aren’t feeling very good about large financial institutions’ balance sheets. As of yesterday, there were 186 U.S.-based financial-services companies trading for less than 60 percent of their book value, or common shareholder equity, including Bank of America, Citigroup Inc. (C), Morgan Stanley (MS), AIG and SunTrust Banks Inc. (STI) Together they had a stock-market value of $300.5 billion, compared with $686.4 billion of book value, according to data compiled by Bloomberg.
Broken Cycle
When I ran the same stock screen for a June 2008 column, a few months before the financial crisis reached full flower, it turned up 168 companies with a combined $120.3 billion market value and a book value of $270.3 billion. The way the credit crunch was playing out then, market declines were begetting writedowns, leading to more market declines and then more writedowns. A year later the cycle broke, thanks to unprecedented government intervention. The largest U.S. banks were reporting quarterly profits again.
Like a Slinky walking down a flight of stairs, though, all it may take is the slightest push for inertial energy to set the writedown cycle in motion again. For instance: Bank of America, at 33 percent of book value, finished yesterday with a $68.6 billion market capitalization. That’s less than the $71.1 billion of goodwill on its June 30 balance sheet. (Goodwill, which isn’t a saleable asset, is the ledger entry a company records when it pays a premium price to buy another).
You Gotta Believe
So, Bank of America would have us believe the goodwill by itself was more valuable than what the market says the entire company is now worth. Investors don’t buy that. They see a company that needs to raise fresh capital, judging by the discount to book value, in spite of the company’s claims it doesn’t need to. The more the stock price falls, the more shares Bank of America would need to issue to appease the markets, leading to fears of even more share dilution.
The same story is playing out in Europe, driven by the sovereign-debt crisis. The 32 companies in the Euro Stoxx Banks Index yesterday had a stock-market value of 313.2 billion euros ($444 billion) and a combined book value of 620.5 billion euros. France’s Credit Agricole SA (ACA), the index’s third-largest bank by assets, trades for just 34 percent of book.
Two years ago the central planners convinced investors that the biggest surviving financial institutions would be able to earn their way back to health, in part through low interest rates and taxpayer support. The pressing question soon may be whether there is enough money on the planet to save the system as we know it, and if so, how much longer it will be before a crisis comes along that finally swamps the ability of governments to contain it.
One-hit wonders such as Fed-induced stock-market rallies can induce euphoria momentarily. They don’t fix the big problem.
Excessive radioactive cesium found in Fukushima fish: Greenpeace
August 15, 2011
Fish caught at a port about 55 kilometers from the crippled Fukushima Daiichi nuclear power plant contained radioactive cesium at levels exceeding an allowable limit, the environmental group Greenpeace said Tuesday.
The samples taken at Onahama port in Iwaki, Fukushima Prefecture, in late July, included a species of rockfish that measured 1,053 becquerels per kilogram. The reading, the highest among the samples, is well in excess of the government-set limit of 500 becquerels per kilogram, according to a study conducted by the environmental group
For article GO HERE
World Bank chief warns economy in 'more dangerous' phase
Saturday, August 13, 2011
The global economy was entering a "new and more dangerous" phase because of the debt crisis in Europe, World Bank chief Robert Zoellick warned Saturday.
Zoellick, speaking in an interview with The Australian newspaper, said Europe's sovereign debt concerns are much more serious than those that saw a credit rating downgrade in the United States.
For article GO HERE
Socio-Economics Put China and India at Higher Investment Risk Than The U.S.
Aug. 13, 2011, 4:44 PM
This week has turned out to be Wall Street's wildest week since 2008. The Dow Jones industrial average closed down 519 points on Tuesday, Aug. 10, but then went up 423.37 points. But overall, Down has now lost more than 2,000, or 16% since July 21, less than three weeks ago. The selloff intensified after the U.S. got stripped of the top notch AAA rating by S&P first time ever in history.
The double AA status has put the U.S. in the same category as China, based on S&P's rating. But one consolation for the United States is that the country's high socio-economic resilience has placed the U.S. at a more favorable investment risk position than major emerging economies like China and India. Socio-economic Resilience Index is a risk metric developed by risk analysis firm Maplecroft measuring the ability of countries to cope with the impacts of a major event.
It is interesting that although some of the developed countries and emerging economies, while all subject to economic exposure to natural disasters, it is the socio-economic resilience that sets these countries apart when it comes to the overall risk to investors.
Based on another risk metric - Natural Hazards Risk Atlas 2011 (NRHA)--from Maplecroft, out of 196 countries, USA (1), followed by Japan (2), China (3) and Taiwan (4) are the only four countries rated as "extreme risk" to economic exposure to natural hazards such as floods, hurricanes, earthquakes.
The large emerging economies of Mexico (5), India (6), Philippines (7), Turkey (8) and Indonesia (9), and two developed countries--Italy (10) and Canada (11) are the remaining to be rated as ‘high risk’.(See Map)
However, in the Socio-economic Resilience category, most developed countries such as the US and Japan are rated as ‘low risk’, whereas some hot growth emerging economies like China, India, the Philippines, Indonesia, Pakistan, Bangladesh, and Iran are all rated as 'high risk’.
According to Maplecroft, while the large developed economies of the US and Japan have the greatest economic exposure to major natural hazards, they also have the capacity and readiness to weather impacts from major disasters. That includes: economic strength, infrastructures, disaster contingency plans, as well as tight building standards, etc.
Many of the emerging economies rated with high socio-economic risk have attracted high FDI (Foreign Direct Investment) inflow in recent years with their rapid growth. The rising economic power of the major emerging economies like China and India, and their lack of resources to respond to major events means the occurrence of a major disaster in these countries may also have global economic impacts and severely affect the global supply chain.
For instance, the severe drought in China earlier this year threatened global wheat crop production and prompted the U.N. food agency to issue warning due to the impact of China’s drought on global food prices and supplies.
Companies deriving a large portion of revenues from emerging Asian countries, although may have enjoyed higher growth in recent year, are at the same time subject to a greater risk of business disruptions than their more domestic-centric competitors.
Nevertheless, just as each country differentiates itself in its capability to respond and withstand major events / disasters, how each company executes its disaster response and business continuity plans may also serve as a differentiator within the pack.
For example, some companies like Apple were able to move quickly to secure their supply chain after the Japan quake, whereas others had to cut or halt production, powerless to respond to lost business and market share.
This also means investors, who are currently diversifying portfolios into Asian countries, need to also factor in natural hazards risks in to their investment strategies.
Bloomberg quoted an EPFR Global report that emerging-market equity mutual funds had more than $7 billion of withdrawals in the week ended Aug. 10, the most since the third week of 2008.
Emerging economies have been all the rage and buzz in recent years partly on stagnant growth in the OECD countries. But in times of uncertainty like we have now, investors tend to put stability above other considerations. Right now, the U.S. still offers relatively stable outlook (albeit with a gloomy near-term GDP growth projection) than most of other regions in the world.
So the risk factors discussed here probably already are playing an implicit role, particularly in the wake of Japan's mega earthquake and the resulted tsunami's, in the recent stock performance of MSCI emerging markets index vs. the S&P 500 (see chart above).
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