TrendLines

December 12, 2018

RAPID growth of Asia's stock markets is driving change in global financial markets - and in M&A. The OECD says integration of Asia's financial markets with the global market has begun . . .

ASIAN companies are now the world's largest users of public equity financing, raising US$81 billion in 2017. Almost twice as many initial public offerings as the annual average between 2000 and 2016 came to market in Asia in that single year. A record number of 1,074 companies listed in Asia in 2017.
In its annual analysis of the global financial market, the Paris-based OCED notes that, on an international scale, the most important development has been the rapid growth of Asian stock markets - both in absolute and in relative terms.
This has, in turn, led to a rise in the number of global pension funds and other institutions investing in Asian equities and Asian corporate bonds. There has also been an increase in mergers and acquisitions.
According to the OECD, integration of Asia's financial markets with the global market has begun. Among the most significant developments, it says, is the implementation of Stock Connect in Hong Kong, which paved the way for foreign investors to buy Chinese A-shares.
"As a consequence, stock exchanges and investment banks in Asia have increasingly become important actors in globally-connected capital markets," says Mats Isaksson, OECD's head of Corporate Governance and Corporate Finance.
Isaksson is author of the OECD Equity Market Review of Asia, launched at the 2018 Asia Roundtable on Corporate Governance.
Thousands of Asian companies are now listed or traded on markets other than their local exchanges, and investment banks from non-Asian markets - in particular from the United States and Europe - play a significant role in Asian markets, together with other globally active intermediaries and service providers.




November 2, 2018

WITH China running out of room to retaliate on goods as the U.S. ramps up tariffs, it could opt to pursue non-tariff actions affecting services and investments from the U.S. says ratings agency Standard and Poor's . . .

HONG KONG -- With China retaliating against the U.S. announcement of tariffs on US$200 billion of Chinese imports -- by imposing 5% to 10% tariffs on U.S. imports valued at US$60 billion effective September 24 -- ratings agency Standard and Poors is predicting what it calls "the shock arising from this escalation by both sides" to eventually have a larger proportionate impact on the U.S. economy than on China's.
U.S. tariffs imposed or to be imposed on Chinese imports now total US$250 billion, which represents about 50% of the US$505 billion value of China's annual exports to the U.S., S&P says.
Chinese tariffs imposed or to be imposed on U.S. imports now total US$110 billion, representing about 85% of the US$130 billion value of U.S. annual exports to China.
 "In the event of a trade war that sees
escalation of the current U.S.-China trade dispute to one where 25% tariffs are imposed on all non-fuel goods between the two largest economies, with a shock to confidence added in, roughly 1.2% cumulatively could be shaved off U.S. GDP over 2019-2021," S&P says.
"For China, the loss to GDP would be around one per cent.




October 24, 2018

COMPARISON with China  will get in the way of understanding the opportunities in India, warns a new report to the Australian Government . . .

TRANSFORMATION of the Indian economy now under way should generate annual growth of between six and eight per cent over the next two decades, according to a new Australian Government report.
The report urges Australian business not to put India in the "too hard" basket, but rather to seriously consider opportunities that will come from the Indian sub-continent.
"Over the next 20 years, no single market in the world will offer more growth opportunities than India," says Peter Varghese, author of the report.  "India will be the world's fastest-growing economy. By 2025, it will overtake China in population and is forecast to become the world's third-largest economy by 2035, as measured by exchange rates."
Varghese says India will not be another China, and that it is a mistake to try to compare the two Asian giants. "India needs to be seen in its own terms," he says. "It has the scale of China, but it will not be another China. Indeed, comparison with China will get in the way of understanding the opportunities in India."
Varghese addressed a luncheon hosted by CEDA (the Committee for Economic Development of Australia) in Sydney to launch the report. A briefing followed in Melbourne.
He said the fundamental difference between India and China was that no Indian Government could ever direct the country's economy -- or control the allocation of resources.
"China has the discipline for economic planning that stems from its political system, and the competence of its State institutions," he said. "There is no counterpart of the Chinese system in India."




October 19, 2018

COMPANIES trading across multiple jurisdictions - and SMEs lacking the resources of the large multinationals to trade digitally - are likely to benefit most from new trade finance platforms being developed in Asia . . .




October 10, 2018

THAILAND is approaching capacity in terms of how many visitors it can handle. A rethink may be needed as the Government promotes Thailand 4.0 . . .

BANGKOK — In early July, while the world focussed on a dangerous and dramatic effort to rescue 13 young football players trapped in a flooded cave in northern Thailand, a tragedy was unfolding further south with the potential to inflict some serious economic damage on Thailand’s economy and reputation.
On July 5, two boats carrying 130 tourists capsized in stormy seas off the popular resort island of Phuket. Forty-seven tourists, all from China, perished.
While the disaster received little media attention globally, it was big news in China, where tour operators began cancelling bookings to Thailand as outraged and nervous Chinese citizens changed their minds about traveling to a country that ranked second among their preferred holiday destinations.
 Tourism is an essential source of revenue for Thailand.
 In 2017, it directly accounted for about 9.4 per cent of gross domestic product, or US$42.2 billion, and indirectly about 21 per cent, or US$95 billion, according to the World Travel and Tourism Council.
 Thailand welcomed over 35 million tourists last year, and more than 9.8 million of them came from China. But within a month of the ferry disaster, over 600,000 Chinese tourists had cancelled their trips to the Kingdom.
 Alarm bells have begun ringing in Thailand.
 Can the country’s tourism industry recover from the fallout of the Phuket boat tragedy? Is the Kingdom truly less safe than other comparable destinations in the region?
 And if tourism takes a prolonged hit, how will that affect the overall economy, which has finally been showing solid growth over the last 18 months following a period of zero growth four years ago?
 Kudos should be given to Tourism Minister Weekrasak Kowsurat.
 Rather than issue hollow assurances that the Kingdom is a paragon of safety, he acknowledged mistakes, accepting responsibility and looking for concrete steps to take.
 He urged Government agencies to begin solving a series of safety-related problems if they wanted to see the country’s reputation restored and improve.
 “If we become known as a country that does not compromise on safety, it will become another plus point for us to be recognised for not being “lax” in our standards,” Weerasak said.
Prime Minister Prayut Chan-o-cha threw his support behind his Minister.




October 10, 2018

China’s US$12 trillion bond market has become too big for global investors to ignore.   China is now the world’s second-largest debt market, behind the US . . .  




October 5, 2018

History repeats, and so it was with the Silver Way, successor to China’s ancient Silk Road.Today’s China is a rising world power that can be bewildering, increasingly willing to go its own way outside the structure of multinational institutions.China bewildered the Spanish of 450 years ago as well, restricting navigation, wanting to set the terms of trade, rarely amenable to either persuasion or the use of force – expecting the world to accept it on its own terms . . .
“Those who cannot remember the past are condemned to repeat it.”  – philosopher George Santayana. 

SURPRISING as it may seem, the looming U.S. — China trade war is a complete about-turn from the first global trading exchange between China and the Americas — the Ruta de la Plata or Silver Way.
That trade lasted for 250 profitable years, ushering in what we now term “globalisation”.
Its largely forgotten history is concisely recalled (87 pages) in The Silver Way (Penguin - China Specials, 2017), by Peter Gordon, founder/editor of the Asian Review of Books, and historian Juan Jose Morales, former President of the Spanish Chamber of Commerce in Hong Kong.
The trade left some enduring benefits: spurring economic and cultural exchange between East and West; the rise of Mexico City as the world’s first “world city”; a population spike and agricultural transformation in China through the introduction of New World crops like maize, sweet potatoes and peanuts; and, not least, the foundation of the first global currency, in the shape of the Spanish silver dollar.
The link between the narrative of the Silver Way and the later Anglo-American narrative is silver — or, rather, the monetisation and integration of the world’s economies via currency and financial markets.
The link remains today in the form of the US dollar and the Chinese yuan — both of which are descended from the Spanish peso.
In 1565, the Spanish explorer Andres de Urdaneta discovered how to sail east from Asia, back across the Pacific to the Americas.
By following “Urdaneta’s route”, his friend, Miguel Lopez de Legazpi, was able to establish Manila in 1571 as a Spanish regional trading hub, to foster an East-West trade — most importantly, silver from the New World in exchange for Southeast Asian spices, Chinese porcelain and silks, Indian fabrics, and rubies and emeralds from India and Ceylon.
This led to the creation of the world’s first global shipping line — the Manila galleon.




September 27, 2018

MAURITIUS is becoming increasingly important in the structuring of Australian METS business into Africa. Liquidity is increasing in Mauritius because of an inflow of cash from Africa . . .

PERTH — Australian resources and investment entities looking for opportunities to gain a foothold across the African continent have been urged to use the small island state of Mauritius, off Africa’s east coast, as their gateway.
 Speaking at the Paydirt 2018 Africa Down Under  mining conference in Perth, Sanjiv Bhasin, Chief Executive of AfrAsia Bank, said Mauritius was unusual in the combination of financial, taxation, investment and political regimes it could offer international investment communities wanting to expand, or to tap into Africa’s exploration, project development and mining opportunities.
He pointed to Mauritius’ simple tax jurisdiction, its access to 44 Double Taxation Avoidance Agreements (DTAAs), and a network of Investment Promotion and Protection Agreements (IPPAs) which offered full investment protection in key African nations.
Bhasin said the IPPAs guaranteed Mauritian investment in regard to expropriation and social unrest in contracting states, while also providing arrangements for settlement of disputes between investors and contracting states.
“That is the sort of investment comfort Australian miners and explorers are looking for in joint venture and other commercial partnerships covering African resources projects,” he said.
Bhasin also urged Australia’s resources players to utilise what he called “Mauritius’ efficient investment structures pertaining to Africa”.
“This includes multi-currency capital raisings in every form, from debt to equity, backed by an OECD-compliant jurisdiction and regional arbitration centre,” he said.
“The Stock Exchange of Mauritius (SEM) also offers the potential for a dual Mauritian-Australian Stock Exchange listing, and that has appeal.”
Addressing the same conference at a break-out session, Kareena Neisius, Vice President of the newly-formed Australian Chamber of Commerce in Mauritius, emphasised the importance of Mauritius as a hub for Africa for Australian State Government trade representatives.




September 5, 2018

Robert Horn
ATI Correspondent

Government and industry measures to cut waste, especially plastic waste, are providing an opening for investors . . .




September 5, 2018

SEOUL - It seems simple: South Korea has labour market woes, and to solve them, President Moon Jae-in proposes a higher minimum wage, more fiscal spending on the social safety net, and higher taxation on larger corporates. But there lies the rub . . .




August 23, 2018

AMONG its 10 target industries for development, Thailand is heavily promoting bioscience and its associated medical research and technology spinoffs  .  .  .

THAILAND has staged three seminars/workshops in Australia to promote investment opportunities in emerging industries and tertiary education.
There was a particular focus on the education sector and on new technology linked to smart farming.
Also high on the development agenda in Thailand are emerging areas in life sciences.
Through its Thailand Centre for Excellence in Life Sciences (TCELS), a division of the Ministry of Science and Technology, Thailand is offering to assist foreign firms wanting to commercialise their innovations.




August 8, 2018

Ratings agency Standard & Poor’s looks at the defence, energy and economic security drivers behind China’s grand plan for a new Silk Road . . .

CHINA’s Belt and Road Initiative (BRI) is a gigantic venture capital project, according to a briefing note by the Standard & Poor’s China Senior Analysis Group.
It says an undertaking of the magnitude of BRI has potentially large payoffs as well as large risks.
Success will rest on whether China’s seed money in the BRI will create creditworthy projects that attract true private-sector outside money. “Seen this way, the BRI is arguably the world’s largest attempted venture capital project,” the note says.
“The geopolitical factor is that China has decided it wants to have greater control than Japan in shaping both its economic and security environment in this region.”
Unlike the United States, which shares borders with two countries, China borders no fewer than 17 countries.
“Of particular interest to China are the western borders, which abut Central Asia that was once part of the former Soviet Union.
“These nations tend to be less political and economically stable than China. As such, they are seen as potential sources of risk, particularly in Xinjing province in China’s northwest.”
 The note says that engaging these countries economically and connecting them to Western China through the BRI serves several purposes.




August 2, 2018

CHINA’s dizzying climb to superpower status is heading for trouble. At least, that seems to be the gloomy verdict of Carl Minzner, an American Professor of Law.
In End of an Era: How China’s Authoritarian Revival Is Undermining Its Rise (Oxford University Press, 2018) Minzner analyses the key challenges facing China today — mounting socio-economic problems, worsening governance difficulties, rising social unrest, and increasing social polarisation.
Cynics might point out that many of these problems are confronted by virtually every civilised society.
But Minzner sets out to explain why these shortcomings may be leading to China’s social and political collapse, and why China is looming as a perceived threat to the current world order.
He points out that China’s 1.4 billion people have never had a chance to benefit from the centuries-old Western democratic tradition of state-society relations.
From dynastic Qing rule, they have lurched from Republicanism to Communism, from Five-Year Plans to Cultural Revolution, before morphing - after three decades of severe ideological and economic reform - into “red capitalism”.  
According to the Professor, there are now unmistakable signs of the nation’s immanent dysfunction.    
He nominates a lack of political opposition as China’s greatest weakness … moderate voices and independent civil society organisations committed to gradual institutional reform — these China sorely lacks.    




August 2, 2018

CYBER ATTACKS on critical infrastructure are multiplying, and are now one of the top two or three priorities that CEOs know they must deal with, says Kumar Parakala, Global Digital Leader of the diversified professional services company, GHD.
He says the rate of growth of cyber threats has been exponential — a seven-fold increase in two years. And the costs are escalating.
Lloyds, in a joint report with Cyence, a leading cyber risk analytics modelling firm, estimates that the impact of a major global cyber-attack has the potential to trigger US$53 billion in economic losses.
That is roughly the equivalent of a catastrophic natural disaster like 2012’s Superstorm Sandy.
“A serious global cyber-attack — on predominantly businesses, government agencies and some individuals — is anticipated to cause that level of havoc, Parakala told ATI.
Some expect global cyber-crime damage to reach US$6 trillion annually by 2021 — up from US$3 trillion in 2015.
And spending on cyber security could exceed US$1 trillion from 2017-2021. The rising tide of cyber-crime pushed information security
(a subset of cybersecurity) spending alone to more than US$86.4 billion in 2017, according to the research and advisory group, Gartner.




July 6, 2018

CHINESE online shoppers prefer to buy from Japan, Korea, the U.S. and Australia, in that order, according to new research by Frost and Sullivan An estimated 500 million Chinese are now shopping online . . .

SYDNEY — Cross-border online shopping spending in China has exceeded US$100 billion, almost eight times larger than Australia’s total online shopping market, according to new research by Frost & Sullivan, in conjunction with the Chinese retail strategy firm Azoya Consulting.
The study reveals that 87% of Australian respondents see China as a lucrative market, with huge opportunities arising from affluent Chinese consumers seeking quality products from other countries - but only 20% are satisfied with their current online capabilities in reaching Chinese shoppers.
“With China now the world’s largest online shopping market, Australian retailers and brands need to consider the best approach to reach Chinese consumers if they want to take advantage of this booming opportunity,” said Mark Dougan, managing director, Australia/New Zealand, of Frost & Sullivan.
“The complexities and challenges involved mean a one-size-fits-all approach isn’t appropriate to meet market demands. They need to carefully determine which model will work best for them.”
The study of 1,000 cross border online shoppers in China, as well as 100 international brand owners and retailers in Australia, New Zealand, the US, Canada and the European Union, was conducted in 2018 to understand the strategies, expectations and experiences of online sales in China.
Mid-size and large retailers with annual revenue of over US$50 million participated in the study, with 36% earning annual sales of more than US$1 billion.




July 6, 2018

U.S. doubts over progress in China on IP protection may be at the heart of the current trade dispute. And a 10% U.S. tariff on Chinese exports worth US$200 billion would equate to an estimated 0.2% to 0.3% decline in China’s GDP growth . . .

WASHINGTON — ANZ Bank believes U.S. wariness about technology transfers is still the major hurdle to overcome in resolving differences between the U.S. and China – and, going forward, it expects the U.S. to continue to initiate other trade measures, with China reciprocating.
Following talks in Washington, the two countries issued a joint statement vowing not to launch a trade war against each other, but based on the official release, ANZ researchers do not see any substantial progress in resolving existing issues in the Sino-US trade relationship.




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