Owner: Wandering around Financial Cities URL:http://louis-fina.blogspot.com Join Date: Fri, 07 Mar 2008 03:49:25 -0600 Rating:0 Site Description: Based in Hong Kong, and will be at London few months later, I strive to write my comments on economies and markets in a more global level. Yes, we lack a global perspective among Hong Kong financial writers. Site statistics:Click here
Taiwan Presidential Election 2008-03-22 09:52:44 From Bloomberg:Ma Ying-jeou won Taiwan
's presidential election, vowing to improve ties with China after eight years of pro-independence rule by Chen Shui-bian.Ma, of the opposition Kuomintang, beat the Democratic Progressive Party's Frank Hsieh 58 percent to 42 percent, according to the Central Election
Commission. About 75 percent of Taiwan's eligible voters cast ballots.For 8 years of ruling by Chen Shui-bian, he has never been an advocate of dealing with economic issues. Rather, he was political, call for the independence of Taiwan. Because of this, the People's Republic of China (PRC) has imposed restrictions in investing in Taiwan, or traveling to Taiwan, etc.I just watched the TV in Hong Kong talking about the election. It says the economy of Taiwan is poor in these year. A real Read more:Presidential
An Unlucky Bear Stearns' Employee 2008-03-25 10:14:13 Bear Stearns
again.Today, I had lunch with a equity trader in my bank (we are not in Bear Stearns). He knows a friend at Bear Stearns who really cried. Why?His friend got his bonus in Bear Stearns Stocks, which were granted when the stock were still above USD100. When JPM offer to buy BSC with stocks which valued at USD2, the poor Bear Stearns employee basically lose all his bonus.Worse is that we thought this bonus would have probably been taxed. If the tax rate was 30%, he paid USD30, then the stocks became USD2, what a big loss!Now the offer from JPM raised to about USD10, it is still a big loss to our dear friend at Bear Stearns.
Read more:Employee
Links for 24/3/2008 2008-03-24 09:38:26 China Life invests $300 million in Visa IPO China Life Insurance Co (601628.SS: Quote, Profile, Research) (2628.HK: Quote, Profile, Research), the country's biggest life insurer, said on Monday that it had invested $300 million in Visa Inc's (V.N: Quote, Profile, Research) initial public offering...Tiffany earnings beat view Tiffany & Co (TIF.N: Quote, Profile, Research) posted higher-than-expected quarterly profit on Monday as increased sales overseas and at new stores helped offset the effects of a weak economy that has put a strain on consumer spending.Federal Home Loan Banks May Buy $150 Billion of Bonds Federal Home Loan Banks were freed to increase their purchase of mortgage-backed bonds by about $150 billion as part of a government effort to pump money back into a market that sl
JPMorgan Chase to raise the offer for Bear Stearns 2008-03-24 09:35:32 From Bloomberg: JPMorgan
Chase & Co. agreed to quadruple its offer for Bear Stearns
Cos. in an effort to overcome opposition from the shareholders of the crippled securities firm. Bear Stearns
stock almost doubled.So those who bought BSC when it was trading at USD 2 something has made a 4 times profit!
Read more:raise
Federal Home Loan Banks to buy Mortgage Backed Securities 2008-03-24 09:29:38 From Reuters:The Federal
Home Loan Bank system will be permitted to expand their holdings of Fannie Mae and Freddie Mac securities by more than $100 billion under a plan endorsed by their regulator on Monday. The Federal Housing Finance Board voted to let the banks use their existing capital to increase their holdings of agency mortgage-backed securities for two years, effective immediately. The move is expected to help stabilize the mortgage finance market roiled by months of increasing foreclosures and other failed investments. "Increasing the agency MBS investment authority for the banks is another way in which the system can perform its traditional mission," said Finance Board Chairman Ronald Rosenfeld, in a prepared statement. The 12 Federal Home Loan banks, wh Read more:Mortgage
, Securities
, Backed Securities
In (my) Focus: Bank of China 2008-03-24 09:11:04 Bank of China
(3988:hk) will announce its 2007 full year result tomorrow. BOC has the most diversified portfolio among Chinese banks. Because of this, BOC had a large exchange rate exposure in the past due to its position in US dollars. Also, BOC has the largest subprime exposure among Chinese banks.Bank of China was listed in Hong Kong in June of 2006 at the price of HKD2.95. It closed a HKD3.02. That means if you bought it in its IPO and hold it till now, you are not much better off than holding cash.Bank of China reported a USD92B holding of subprime related ABS and CDO. Further write-down is now expected in the announcement of the full year result.From Trading Markets:Bank of China (BOC) is expected to report on Tuesday a net profit of 43.35 bln to 52.09 bln yuan for 2007, up 1.2 Read more:Focus
Will G7 intervene the currency market? 2008-03-31 06:20:43 From the Economist:Under the right conditions, currency intervention can work.The dollar is weakening to a level which makes Europe, Japan, and many others (like me, because there is currency peg of HKD with USD). The article in the Economist implies that for the currency intervention to be successful, the key would be that the European Central Bank (ECB) to cut interest rate. Unfortunately, we see this report today:From Bloomberg:European inflation accelerated to the fastest pace in almost 16 years, making it harder for the European Central Bank to cut interest rates as a global credit squeeze saps confidence among executives and consumers.
How the war on Iraq puts U.S. economy in trouble 2008-03-31 06:07:20 My reader left me a comment on my last short post on our unlucky friend at Bear Stearns. I will not repeat what he has said in my post, but this did force me to think more about the relationship between the was (on Iraq
in particular) and the U.S. Economy. After thinking for days (that's why I wrote nothing these days), I have the feeling the the implication of the was is not as obvious as one might realize, but the implication is huge.I would like to start with the money spent on wars. We probably do not need an exact figure to suggest the the U.S. government has spent more than we could imagine on war, and this is a big reason why the government has been running a deficit since Bush came into office. Of course, government spending is a part of the gross domestic product (GDP), and if Read more:economy
Ben Bernanke's speaking 2008-04-02 09:16:06 The Chairman seems to become more pessimistic about the US economy than before. He is now speaking in the testimony in Congress. He also defended the bail-out for Bear Stearns.From Bloomberg:Federal Reserve Chairman Ben S. Bernanke
acknowledged for the first time that the economy may contract as homebuilding weakens further, unemployment rises and consumer spending slumps."It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,'' Bernanke said in testimony to Congress's Joint Economic Committee today. He also told lawmakers the Fed's agreement to provide an emergency loan to Bear Stearns Cos. followed a March 13 warning by the company that it "would have to file for Chapter 11 bankruptcy the next
Links for 2/4/2008 2008-04-02 08:56:30 The new decoupling The team at Bank of America have produced this effort, which shows just how richly equities are trading on a historical basis relative to credit spreads. Credit, they add, appears to have overshot.IMF Cuts Global Forecast on Worst Crisis Since 1930s The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.Paulson Says Treasury 'Flexible' on Housing Measures Treasury Secretary Henry Paulson indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.
Bottoming Process Revisited 2008-04-02 05:46:26 From Bloomberg:Securities sales by UBS AG, the world's largest money manager, and Lehman Brothers Holdings Inc. underpinned a rally in financial stocks that may signal an end to eight months of market turmoil.UBS, battered by the biggest writedowns from the collapse of the U.S. subprime mortgage market, announced plans to seek 15 billion Swiss francs ($14.8 billion) in a rights offer to replenish capital, while New York-based Lehman, the fourth-largest U.S. securities firm, raised $4 billion in a stock sale.The fund-raising plans quelled speculation the companies might follow New York-based Bear Stearns Cos., which agreed to sell itself last month to JPMorgan Chase & Co. for a fraction of its market value after a run on the company. Investors looked past Zurich-based UBS's 12 billion-S Read more:Process
, Revisited
Inflation at 164,900%!!! 2008-04-04 10:16:44 From FT Alphaville:As the ZANU-PF meets to contemplate a presidential run-off, the latest economic data is in. According to Zimbabwe’s central statistics office, inflation accelerated to 164,900 per cent in January, from 100,580 per cent the months before. As these levels, the rise in practical terms is academic. But the chart below, drawn up by Renaissance, shows that even by Zimbabwe’s sky-high standards this is something else. They note that the escalating inflation is “entirely due to the continued printing of money by the reserve bank, against the backdrop of ever-scarcer goods and services.” There remains speculation that the official numbers may underestimate the true rate of prices rises - though the month-on-month numbers, arguably a closer real approximation to what Read more:Inflation
Links for 4/4/2008 2008-04-04 09:26:35 IHT Subprime Write-down League Table The International Herald Tribune published the write-down league table shown below, after UBS and Deutsche Bank announced last Tuesday additional massive write-downs aggregating $23 billion.Treasuries Advance After Job Losses in March Exceed Forecasts Treasuries rose, led by longer- maturity debt, after a government report showed the U.S. lost more jobs in March than analysts forecast, reinforcing speculation the economy is in a recession.UBS Former President Arnold Proposes Overhaul of Bank Former UBS AG President Luqman Arnold called for a breakup of the biggest Swiss bank after about $38 billion of writedowns on debt securities erased more than half its market value in the past year.U.S. Loses 80,000 Jobs, Unemployment Rate Increases The U.S. lost jo
From rice shortage to economic growth 2008-04-03 10:39:43 From Bloomberg:Rice climbed to a record and corn traded near its highest ever on speculation the 3 percent annual increase in global demand for cereals will outstrip supply as governments curb exports to prevent protests. Rice, the staple food for about 3 billion people, rose 2.4 percent in Chicago trading today after doubling in the past year. Soybeans advanced for the third day and wheat gained. Crop supply has been reduced by drought in countries including Canada and Australia and a U.S. freeze followed by excessive rain last year.I have no idea about why the price of rice would rise, even I, as a Hong Kong person, eat rice everyday. Again, "thanks" to the currency peg of HKD with USD, the purchasing power of my hard earned money is shrinking. Maybe Jim Rogers was right, i
Links for 3/4/2008 2008-04-03 08:45:41 U.S. Initial Jobless Claims Rose 38,000 to 407,000 The number of Americans filing first-time claims for unemployment benefits unexpectedly increased last week and total benefit rolls rose to the highest level since July 2004.Soros Sees Additional Market Declines After Temporary Reprieve Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.Money-Market Rates Rise as Banks Keep Hoarding Cash The cost of borrowing in dollars and euros for three months rose, as widening credit-market losses encourage banks to keep hoarding cash.U.K. Lenders Expect Further Credit Curbs, BOE SaysThe Bank of England said financial institutions plan to cut mortgage and corporate lending, intensifying a cred
Links for 7/4/2008 2008-04-07 07:54:17 World stocks power to one-month high World stocks hit a fresh one-month high and the dollar rose on Monday, bolstered by firmer commodity prices and growing expectations that banks are making progress in cleaning up their credit-related troubles.Yahoo Insists Microsoft Raise Its $44.6 Billion Offer Yahoo! Inc., responding to Microsoft Corp.'s weekend threat of a proxy fight that could result in a lower takeover price, said the current $44.6 billion offer must be raised before any merger can take place.U.S. Stock-Index Futures Gain; Exxon, Newmont Climb in Europe U.S. stock-index futures rose as higher oil and copper prices lifted commodity producers and Merrill Lynch & Co. analysts said credit markets may be "past their worst.''Wall Street Without Bear Means Goldman Keeps Leverage Gold
Joseph Yam: Please Abandon the Currency Peg 2008-04-05 10:42:48 ... or peg HKD with CNY.From Bloomberg:There's a 10 percent chance Hong Kong dollar's 24-year-old fixed exchange rate to the U.S. currency will break in the next year because it is fueling inflation, said Lehman Brothers Holdings Inc. Price increases have surged to the fastest in 10 years as the currency's link to the falling U.S. dollar has raised import prices. China, Hong Kong's biggest trading partner, is accelerating gains in the yuan boosting the costs of eggs, chicken and rice from the mainland. "The pressures on the peg all rotate around inflation,'' Craig Chan, a foreign exchange strategist at Lehman Brothers in Singapore, said in an interview today. "While I'm not expecting a break of the peg, the pressures to test it are building up.'' The Hon Read more:Joseph
, Please
, Abandon
, Currency
British Pound weakened. How about UK economy? 2008-04-08 09:26:35 From Bloomberg:The pound fell to a record against the euro after the U.K.'s biggest mortgage lender said house prices dropped by the most since 1992 last month, adding to the case for an interest-rate cut this week. Britain's currency also declined to a six-week low versus the dollar after HBOS Plc said the average cost of a home fell a more-than-forecast 2.5 percent as high street banks restricted mortgage lending amid the credit squeeze. The Bank of England will cut its main rate a quarter-point to 5 percent on April 10, according to 50 of 61 economists in a Bloomberg News survey. Government bonds rose on expectations for lower rates, with the yield on the two-year note falling 3 basis points to 4 percent. The price of the 4.75 percent security due June 2010 gained 0.06, Read more:British
, Pound
, economy
Alan Greenspan speaks 2008-04-08 09:13:57 From Bloomberg:Former Federal Reserve Chairman Alan Greenspan
said the drop in U.S. home prices will probably end "well before'' early next year as the number of houses on the market diminishes, aiding an economic rebound.Does this offer us some hope? Not really, because Greenspan also said the recovery will be "slow and hesitant".Did Alan Greenspan
caused the bubble which is burst now? He defended the increasing criticism in an article published at Financial Times:The former Fed chairman says the most likely cause of this global house price boom was a “dramatic fall in real long term interest rates” around the world, which he believes was caused by abundant global savings. In any event, Mr Greenspan says, it is only with hindsight that it looks like the US economic recovery was wel
Links for 8/7/2008 2008-04-08 08:56:12 IMF Says Financial, Economic Losses May Swell to $945 Billion The International Monetary Fund said financial losses stemming from the U.S. mortgage crisis may approach $1 trillion, citing a "collective failure'' to predict the breadth of the crisis.Greenspan Says U.S. Home Prices May Stabilize in 2008 Former Federal Reserve Chairman Alan Greenspan said the drop in U.S. home prices will probably end "well before'' early next year as the number of houses on the market diminishes, aiding an economic rebound.Morgan Stanley's Mack Sees Crisis Lasting 'Couple of Quarters' Morgan Stanley Chief Executive Officer John Mack said the credit crisis is going to last "a couple of quarters'' longer as it spreads to commercial real estate, subprime mortgages in Europe and U.S. midsized banks.Washington Mu
McKinsey Global Institute 2008-04-10 10:11:57 I came across some reports from the McKinsey GlobalInstitute
in my work, and I found it to be useful. They were very well written, with much information. Highly recommended.Although it was an old article, their research in China capital market is still highly relevant. It shows us how the capital market is like, and how imperfect it is. Also, it gives a direction of what kind of development will be needed for China to further develop there financial infrastructure.The report can be found here. The report is very long, and I have not completed reading it. Besides this, there is also report about whether the current account deficit of US can be sustained.
Save, save, save! 2008-04-10 09:52:03 From the Economist:Lesson one: the secret to becoming a millionaire. Answer: save, save, save.It is interesting to read this article. It tells us that how many of us actually know nothing about finance. Finance is not something easy, as I observed in many of my friends, they simply are not interested, shy away from it, and take not much effort in managing their money, and take no effort to learn more about it. True, it was not the phenomenon seen only in US, it is all over the world. Is this what causes today's problem in the world of finance? Possibly.It is true that education in most part of the world has taken no effort in teaching personal finance to students at all level, however, it is also remarkable to see how Chinese people save. From those old saying from out older generati
What kills Oasis Airlines? 2008-04-09 06:15:09 From Bloomberg:Oasis Hong Kong Airlines
Ltd., the 17-month-old budget carrier that took on Cathay Pacific Airways Ltd. on some of its most profitable routes, ceased operations, crippled by rising oil prices and landing fees at Asia's third- busiest airport.The airline has applied for a voluntary liquidator and is seeking new investors, Chief Executive Officer Stephen Miller said at a Hong Kong press conference. It was losing more than HK$1 million a flight, the Hong Kong Economic Times said earlier, citing unidentified people.Oasis was unable to sustain its low-fare model because of competition from Cathay Pacific, Hong Kong's biggest airline, and four other carriers on flights to London. The airline is the fourth worldwide to shut down within two weeks after a 73 percent surge in fuel cos
Links for 10/4/2008 2008-04-10 10:26:44 Bank of England Lowers Rate to 5% on Recession Risk The Bank of England cut the benchmark interest rate for the third time since December as higher credit costs and the worst housing slump in 16 years threatened to push the economy into a recession.Russia to Cut Oil Taxes as Production 'Stagnates' Russia will cut taxes on oil companies to overcome production ``stagnation'' after a decade of growth, Energy and Industry Minister Viktor Khristenko said.U.S. Economy: Trade Gap Unexpectedly Grew on Imports The U.S. trade deficit unexpectedly widened in February, reflecting a jump in purchases of imported automobiles and other goods that will probably reverse as the economy falters.Trichet Not Ready to Cut Rates Even as Risks Mount The Bank of England lowered its benchmark rate a quarter- point
Links for 14/4/2008 2008-04-14 10:56:12 Recession Has Bernanke, Greenspan Agreeing Companies Have Cash The U.S. economy has what Alan Greenspan calls one "major advantage'' as it falls into a recession: Businesses are in far better financial shape than they were entering the past two contractions.U.S. Retail Sales Rise on Gain in Gasoline Purchases Retail sales in the U.S. rose in March, reflecting increases in receipts at service stations as gasoline prices jumped.Goldman Strategist Says U.S. Earnings Are 'Awful' The U.S. corporate earnings season got off to an "awful'' start and stocks will continue to fall, according to Goldman Sachs Group Inc.Wachovia Posts Loss, Plans $7 Billion Capital Raising Wachovia Corp., the fourth-largest U.S. bank, reported an unexpected loss because of subprime- infected mortgage holdings, cut its
Save Windows XP!!! 2008-04-14 10:40:23 From Business Week:Microsoft Corp.'s operating systems run most personal computers around the globe and are a cash cow for the world's largest software maker. But you'd never confuse a Windows
user with the passionate fans of Mac OS X or even the free Linux operating system. Unless it's someone running Windows XP, a version Microsoft wants to retire. Fans of the six-year-old operating system set to be pulled off store shelves in June have papered the Internet with blog posts, cartoons and petitions recently. They trumpet its superiority to Windows Vista, Microsoft's latest PC operating system, whose consumer launch last January was greeted with lukewarm reviews. No matter how hard Microsoft works to persuade people to embrace Vista, some just can't be wowed. They complain about Vis
Currencies and monetary policies 2008-04-14 09:16:48 I came across an interesting article from Jim on New Deutsche Mark via Strategic Investor. It would be an interesting discussion, although I don't have much time to go into it deeply at the moment. However, I do have a few words to say about currencies and monetary policies.Readers of this blog would know that I have been very critical of the idea of the currency peg of Hong Kong Dollar. Currency peg makes the central bank hopeless in setting monetary policy, unless we peg to a currency in which the economy of that country bears a closer relationship with ours. That was why I said pegging HKD to CNY make more sense now.In the case of Europe, it is not about a peg, but a single curency for EU. The motivation of using Euro is simple. My friend once described to me a ridculous but true Read more:Currencies
Hey Louis! Where are you!? 2008-05-25 20:59:51 I am here!I have to apologize for posting nothing for more than a month! And I have to apologize for posting nothing for two weeks more.Why?
Read more:Louis
LIBOR setting 2008-06-10 10:16:18 London Interbank Offered Rate (LIBOR) is the most important interest rate benchmark in the financial market. Derivatives contracts are mostly priced and valued by LIBOR. Since March, doubts have been cast on the accuracy of LIBOR.LIBOR is compiled by the British Banker Association (BBA), which asks different banks to quote the interest rates for loans of different maturities from overnight to 1
!@£$-flation 2008-06-10 10:07:47 Are we heading to stagflation?Some people say no.In this report from Reuters, several economists suggested that we lack one important receipt for stagflation, which is rising wages.While I believe that this is true for developed world, I wonder how valid this argument is for countries like China, India, etc. And "thanks" to globalization and the integration of world economy, this is going to have
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