Posts Tagged ‘Hong Kong’

Rising Dollar Sparks Tumult in Emerging Markets

May 21, 2018

U.S. currency’s rally puts spotlight on weaknesses in a broad range of emerging-market assets

No automatic alt text available.


The Wall Street Journal

A resurgent dollar is exposing weaknesses in the developing world, pushing investors to unwind long-held bets on emerging-market stocks, bonds and currencies…

Ripples from the dollar’s comeback have spread. Indonesia’s central bank on Thursday raised interest rates for the first time in four years to arrest a drop in its currency; Hong Kong’s monetary authorities last week stepped in to prop up the territory’s weakening dollar. The Turkish lira fell to fresh lows against the U.S. dollar, while Brazil’s real declined to its weakest level in more than two years. The MSCI Emerging Market Index, which measures stock performance, is down 11% from its January highs as of Friday.

Investors have piled into emerging-market stocks and bonds for the last several years, often glossing over important macroeconomic or political issues as they sought returns that dwarfed those found in the developed world. Now that the dollar is strengthening and U.S. yields rising, those shortcomings are becoming more glaring. A rising dollar makes it more difficult for countries to service debt denominated in the U.S. currency, while rising yields diminish the attractiveness of foreign assets.

“The markets are now realizing they have to pay attention to fundamentals and assessing which countries are the most vulnerable,” said Mark McCormick, North American head of FX strategy at TD Securities.

Danger ZoneFX reserves as a percentage of externalfinancing needsSource: Institute of International Finance
Danger zoneThailandRussiaKoreaPhilippinesChinaBrazilIndiaMexicoColombiaHungaryEgyptMalaysiaCzech Rep.IndonesiaChileSouth AfricaPolandArgentinaUkraineTurkey0%200400600

Investors are particularly nervous about nations with large current-account deficits, which comprise goods and services, trade and investment income, and those that rely on foreign investment to finance government spending, or fiscal deficits. Their dependence on the rest of the world for trade and government finances leaves them badly exposed when the dollar rises.

Argentina, whose currency and stock market plunged in recent weeks amid fears of a brewing financial crisis, carries both a current-account and a fiscal deficit. Other emerging markets with large current-accounts gaps include Turkey, with a deficit that stood at 5.5% at the end of 2017, as well as Colombia, South Africa, Indonesia, India and Mexico.

The current-account deficit “captures living beyond your means,” said Robin Brooks, chief economist at the Institute of International Finance.

Politics are another worry. Mexico’s peso, a top performer last quarter, has been dogged by concerns over the renegotiation of the North American Free Trade Agreement and a looming presidential election. Even the recent climb in oil prices has barely helped the currency of oil-producing Russia, where worries of fresh U.S. sanctions against Moscow have dented the ruble.

As volatility spreads throughout emerging-market assets, investors who had arrived relatively recently are looking toward the exits, said Tim Atwill, head of investment strategy for Parametric Portfolio Associates.

“There is this large amount of new investors who have only experienced the good days. They’ll start leaving. They’re not used to the riskiness,” he said.

Jumps in the dollar and U.S. yields have burned emerging-market investors before. Many developing countries borrowed heavily in dollars and kept their currencies tightly pegged to the U.S. currency in the 1990s. A swift dollar rally forced them to raise interest rates and push up their own currencies to unsustainable levels, damaging exports, hurting growth and eventually setting off the Asian financial crisis in 1997.

Developing countries had largely loosened their currency pegs and built up reserves by 2013. Still, many swooned that year when yields shot higher after then-Federal Reserve Chairman Ben Bernanke indicated the central bank might wind down its bond-buying program in an episode known as the “taper tantrum.”

Today, some emerging economies may be at least partially shielded by robust growth rates, analysts said. The IMF’s April forecasts, made before the recent turmoil, projected India’s growth at 7.4% and expected both Indonesia and Malaysia to grow by 5.3%.

And others have shored up their finances. Countries including South Africa, Mexico and Brazil have narrowed their current-account deficits, and some have promised or launched economic and political reforms.

Still, that may not be enough. While Asia’s economies are growing briskly, others are struggling: Argentina is expected to grow at just 2% this year, Mexico at 2.3%, Colombia at 2.7%, Brazil at 2.3%, and South Africa at 1.5%.

Plus, some analysts believe a continued rise in the dollar and U.S. yields will punish comparatively healthy emerging markets alongside more vulnerable ones. In 2013, for example, fears of a slowdown in China and a drop in commodity prices sparked a three-year drop in the MSCI Emerging Markets Index.

The stronger dollar “is slowing the flow of loose money floating around the world, looking for something to do with itself,” said Kit Juckes, a strategist at Société Générale. “The world tends to be a much happier place when the dollar is not going up.”

Write to Ira Iosebashvili at, Josh Zumbrun at and Julie Wernau at


Hong Kong journalist attacked in Beijing — Video looks like Chinese Police Abduction — After Intimidation, Forced ‘Confession’

May 16, 2018

A Hong Kong video journalist was bloodied, handcuffed and dragged into a van by police in Beijing while trying to cover a hearing involving a human rights lawyer on Wednesday.

AFP and South China Morning Post

A Hong Kong journalist was arrested and left injured while trying to interview a human rights lawyer in Beijing on Wednesday (May 16), the second violent incident against the city’s reporters in China within a week.

TV footage showed police bundling cameraman Chui Chun-ming to the ground and dragging him into a van.

Chui, who is from Hong Kong and works for the city’s Now TV channel but is based in Beijing, was released hours later after signing a letter of remorse.

Reporters from outside mainland China including those from semi-autonomous Hong Kong are usually given a much freer rein than domestic journalists, who have little opportunity to air their views in a country dominated by state media.

Now TV expressed “extreme anger” over the “unreasonable and violent obstruction during their lawful reporting in Beijing”.

The incident came four days after another Hong Kong journalist was kicked and beaten by two men while covering the tenth anniversary of a devastating earthquake in Sichuan.

The men claimed they were “ordinary people” but local residents said they were linked to the government, according to Hong Kong media.

Wednesday’s footage showed police obstructing Chui and asking to see his press pass as he attempted to reach a hearing at the Beijing Lawyers Association.

The hearing was to decide whether human rights lawyer Xie Yan-yi, who Chui was trying to interview, should have his licence revoked, according to Now TV.

Xie was one of the lawyers arrested in Beijing’s “709 crackdown” of 2015, which marked the largest ever clampdown on the legal profession in China.

When Chui asked police to return his press pass after inspection several officers forced him to the ground, where two plainclothes men pinned his arms behind his back and pushed his head down.

He was then handcuffed and put in the van, with Xie also taken away in a police car.

The Hong Kong Journalists Association urged China to stop “uncivilised acts and suppression” of reporting work. The group handed a joint letter signed by local media to China’s liaison office in the city on Wednesday.

The Foreign Correspondents’ Club of China also called for “an immediate end to violence against journalists in China”.

But Hong Kong officials refused to condemn police actions when pressed by reporters, saying that they needed to “establish the facts”.

Chief secretary Matthew Cheung said the Hong Kong government was “very concerned” about the safety of the city’s reporters carrying out their duties “anytime, anywhere”.

Chui was held for four hours then released to hospital to check injuries to his forehead, wrists and knees.

Now TV said he was requested to sign a letter of remorse to admit that he had displayed a “radical reaction” and was “interfering with a public function” before he was released.

A BBC team was also attacked last year by a large group of men as they tried to interview a Chinese woman petitioning the government.

Source: AF



South China Morning Post

A Hong Kong video journalist was bloodied, handcuffed and dragged into a van by police in Beijing while trying to cover a hearing involving a human rights lawyer on Wednesday.

Now TV called for the immediate release of its cameraman, Chui Chun-ming, as the State Council’s Hong Kong and Macau Affairs Office “mediated” at the request of the Hong Kong government.

The incident came four days after i-Cable News journalist Chan Ho-fai was kicked and beaten by two men in mainland China’s southwestern Sichuan province while reporting on the 10th anniversary of a deadly earthquake.

In a statement, Now TV expressed anger over the “unreasonable and violent obstruction” of its reporting crew, which it said had been operating within the law.

The station said Chui had a press permit allowing him to work in Beijing.

It said the cameraman and other crew members were covering a Beijing Lawyers Association hearing that involved human rights lawyer Xie Yanyi at 9am on Wednesday.

The Post understands that the hearing related to Xie’s past work defending Falun Gong practitioners. Xie was one of the lawyers arrested in the “709 crackdown” of 2015, during which the Chinese government arrested about 300 lawyers and activists.

On Now TV video footage, Chui could be seen being held down by at least three men in plain clothes and then handcuffed by two uniformed officers.

A woman could be heard asking police: “Why are you doing this? On what grounds are you handcuffing him?”

The cameraman was seen bleeding near his left temple before being dragged into a police van in what the station called a “forcible” manner.

A source on site said that just before the incident, the Now TV crew had approached Xie but were stopped by officers.

The crew cooperated with police and gave them their press passes and ID cards, the source said.

Read the rest:

Xi Jinping says ‘China can come out of trade war in better shape than US’

May 16, 2018

Image may contain: 1 person, suit

President Xi Jinping has told the British ambassador to China that the Communist Party has “the levers and the country had the resilience” to come out of a trade war in better shape than the United States.

By Stuart Lau
South China Morning Post

President Xi Jinping has told the British ambassador to China that the Communist Party has “the levers and the country had the resilience” to come out of a trade war in better shape than the United States.

The remarks, made at a dinner, were revealed by Barbara Woodward, Britain’s top diplomat in China, and come as Beijing and Washington have held a series of talks aimed at preventing a trade war.

The disputes include US complaints about alleged theft of American intellectual property and China’s massive trade surplus with America, which the Trump administration says has been created by unfair trading practices.

“I was at this small dinner with Xi Jinping earlier this year and he was in studied and quite thoughtful mode about the potential trade war,” Woodward said during a speech at the University of Oxford on Tuesday.

“He said everyone would lose out, but he felt that the party had the levers and the country had the resilience to come out the other side, in better shape than the US,” Woodward said.

She added that while Xi was “naturally” seeking to influence as well as inform, her sense was that “he believed what he was saying”.

Xi’s recent speech about achieving technological independence from the US, Woodward said, was “cut from similar cloth”.

The UK envoy described China as politically, economically and globally confident, but added: “Overconfident, perhaps.”

“I think China underestimated the level of frustration that their state capitalist model was building up in different developed markets and in developing markets before that,” she said.

Chinese President Xi Jinping pictured during a meeting at the Great Hall of the People in Beijing earlier this month. Photo: EPA-EFE

China’s confidence resulted in what Woodward said was the country’s first breach of the Sino-British Joint Declaration over Hong Kong.

She did not elaborate, but said the British government strongly criticised Chinese law enforcement officers for “kidnapping” booksellers in 2015 who were physically in Hong Kong but accused of offences on the mainland.

She also questioned whether other countries would benefit from Beijing’s Belt and Road Initiative aimed at developing trade and infrastructure ties between China, Central Asia and beyond.

“The proof of the pudding, of course, will be in the eating. And the pudding without recipe or ingredients like the ‘community of common destiny’ or ‘a shared future of mankind’ or ‘a new model of international relations’ rightly gives us pause,” she said.

Woodward said there were areas where China and Britain could cooperate as the UK negotiates its exit from the European Union. These include climate change, intellectual property and medicine.

Woodward insisted, however, that Britain would not kowtow to China on all issues in the future, nor automatically side with the United States on international issues.

“In blunt terms, the UK is not simply going to subcontract its foreign policies to the United States or to China,” Woodward said.

A file picture of Liu Xia, the widow of the Nobel Peace Prize winner Liu Xiaobo. Photo: Handout

Woodward made no mention of human rights issues in her speech, including the case of Liu Xia, the widow of the rights activist and late Nobel Peace Prize winner Liu Xiaobo.

She has been held under house arrest since 2010, but has never been charged with any offence. Germany has demanded the Beijing authorities release her.

People attend a candlelight march for the late Chinese Nobel laureate Liu Xiaobo in Hong Kong on July 15, 2017.Liu Xiaobo was branded a criminal by authorities and repeatedly jailed throughout his life. Getty Imgaes

Move over London, hello Hong Kong-Beijing-Shanghai as the world’s top financial centre?

May 15, 2018

Chris Rowley says the hunt for the city that will take over London’s mantle as the top global financial centre has been unduly focused on Europe, when Asia is the region to watch

There have been fierce debates in the United Kingdom and the rest of Europe since the Brexit vote about what might happen to the City of London in terms of its position as the world’s pre-eminent financial services centre. These arguments by commentators, practitioners, policymakers and academics disappointingly, but not unexpectedly, have been conducted in a simple, narrow, extremely eurocentric, even ethnocentric, manner which treats the subject as a zero-sum game.

Too many commentators seem to think the “best” and “most obvious” – and by implication “only” – competitors to London’s financial crown are in the European Union. To shed some light on this narrowness, we can look at the widely used Global Financial Centre Index, which ranks all the major centres. Its latest report continues to rank London first but the EU’s most commonly mentioned alternatives ranked poorly. Frankfurt was 20th (down nine places), Paris 24th (up two), Dublin 31st (down one) and Amsterdam 50th (down 17).

A trader from BGC, a global brokerage company in London’s Canary Wharf financial district, reacts as European stock markets open on June 24, 2016, after Britain voted to leave the European Union. Photo: Reuters

Interestingly, too many senior bank executives, especially vastly overpaid US ones, fly into various EU destinations on very short visits and naively proclaim how they could do business in city X, Y or Z. Yet, this is more banker rhetoric than reality. Being shuttled around on closely choreographed and micromanaged visits in these cities bears no connection to the everyday realities of living and working in the location being lauded.

The City’s agglomeration effects and benefit of history, scale and scope of financial services will not be easy to replicate

Thus, too often, the unacknowledged costs of relocating financial services to these alternatives are frequently ignored. These include language capabilities, salaries and bonus structures, direct and indirect tax rates, cost of living, requisite housing and schooling provision, skills base and related support staff, and physical infrastructure. For example, employment in the financial sector in London stands at around 729,600, compared to 333,000 in Paris, but just 74,700 in Frankfurt and only 35,500 in Dublin.

To help put these numbers into perspective, we can look at the scale of some US finance institutions in the UK. JP Morgan alone employs about 16,000 people while Goldman Sachs and Morgan Stanley each employ another 6,000. The City’s agglomeration effects, benefit of history, scale and scope of financial services will not be easy to replicate, especially in the short term, by more niche players.

Frankfurt has been touted as a successor to London as Europe’s premier financial centre, but the city employs only 74,700 financial professionals at the moment. Photo: Bloomberg

In contrast, many leading financial centres in the Asia-Pacific region improved their ratings in the Global Financial Centre Index rankings. Tianjin was a new entrant and Qingdao rose significantly in the ranks. Hong Kong and Shanghai were ranked third and sixth respectively, with Beijing and Shenzhen also in the top 20.

Shanghai and Qingdao were the top two centres that finance professionals thought would become more significant in the future

The index also noted that Shanghai and Qingdao were the top two centres that finance professionals thought would become more significant in the future. This view is underpinned by China’s liberalisation reforms, which include state-led ambitions of developing Shanghai into a global financial centre. However, there are some important constraints to this goal, such as the need for the rule of law, robust institutions and reducing the moral hazard of ultimate government rescue.

Of course, Asian rivals face the huge task of matching not only the depth but also the breadth of London’s financial might. In this respect, the network of China’s financial centres may prove to be important. This might involve creating synergy between the different financial centres with each bringing to bear their own strengths, for example.

The obvious trio would first include Hong Kong, as a well-established and highly developed international financial hub and gateway to China, which attracts leading global commercial and investment banks, and wealth management, hedge fund and private equity firms. Second, Shanghai, as a commercial international financial centre with many financial markets, including stock, gold, financial derivatives and foreign exchange, and which hosts foreign commercial, investment and state banks. Third, Beijing as a political-financial centre with major financial regulatory agencies and state-owned banks.

In sum, the UK’s Brexit vote has raised important issues, including the future of the City of London as the world’s top global financial centre. However, the debate seems to have been reduced to just an inward-looking, EU-focused discussion, whereas the big picture requires us to see that we are now in what will be the Asian century, characterised by the region’s growing and dynamic economies and, in particular, China’s rise.

The fact that the Global Financial Centre Index includes several Chinese centres, some of which performed very well, is indicative of the ongoing shift of global economic power and the increasing importance of China in international finance. We may hypothesise that it will be Asian financial centres, such as Tokyo, Singapore, a hub for Southeast Asian financial networks since the 19th century, and cities in China, not those in the EU, that may prove to be potential competitors to London’s pre-eminence in financial services post-Brexit.

Professor Chris Rowley is a visiting fellow at Kellogg College, University of Oxford. He is a leading figure in the study of employment and human resource management, and business and management in Asia

Hong Kong Student Leader Branded “Enemy of the People” by Chinese State Media For Disrespecting the National Anthem

May 14, 2018

A Hong Kong student leader has been declared an “enemy of the people” by Chinese state media for speaking out over a new law against disrespecting the national anthem, in what critics say is another attack on freedom of speech in the city.

Ms Cheung in a poster for student election. She wears a black t-shirt and smiles.

Photo: Cheung Sin Ying serves as the chairperson of Hong Kong Federation of Students. (Supplied: Cheung Sin Ying)

The vilification of the 21-year-old comes as concern grows there is no longer room for open political debate in Hong Kong under pressure from Beijing.

Alice Cheung, head of the Hong Kong Federation of Students, was surrounded by security officers during a meeting at the city’s legislative council last week seeking citizens’ views on the controversial new law, which opponents say could pave the way for political prosecutions.

© AFP/File | Hong Kong does not have its own anthem so China’s is played to represent it at events

Alice Cheung, head of the Hong Kong Federation of Students, was surrounded by security officers during a meeting at the city’s legislative council last week seeking citizens’ views on the controversial new law, which opponents say could pave the way for political prosecutions.

Cheung told the committee meeting she wanted “to vomit” every time she heard the national anthem. Hong Kong does not have its own anthem so China’s is played to represent it at events.

“It is proof that this murderous regime still exists and holds power,” she added.

 Image result for Alice Cheung, hong Kong, anthem, photos
Alice Cheung

Since then she has felt the full force of Chinese state and social media, which have labelled her an independence activist.

“My family are worried about me,” she told AFP. “I feel under pressure”.

The city is obliged to introduce its own version of the mainland’s anthem law which was fine-tuned last year and upped punishment to three years’ imprisonment.

Football fans have regularly booed and turned their backs when it is played to represent the Hong Kong team at matches.

After Cheung’s original comments she was later told by the pro-Beijing committee chairman that she could not speak again, but did so anyway saying others had been given more time to put their views forward.

She was surrounded by security and voluntarily left the room with the chairman accusing her of causing “chaos”.

Image result for Alice Cheung, hong Kong, anthem, photos

– ‘Enemy of the Chinese people’ –

Her comments were widely shared on the mainland. A commentator on the website of state broadcaster CCTV said such acts must be met with a “resolute crackdown”.

“The separatism advocated by the ‘Hong Kong independence camp’ is unpopular and they will certainly become the enemy of the Chinese people and the laughing stock of history,” the article read.

Cheung told AFP she had received dozens of hostile messages on Facebook in the last few days.

“A few randomly asked me: ‘Do you know everyone in China hates you?’ Or, ‘Do you know people in the mainland all want to attack you?’ she recounted.

“(A public hearing) shouldn’t be a high-pressure venue where after you’ve spoken you will be framed as the enemy of the people,” she added.

Hong Kong’s mini-constitution safeguards freedom of speech but the prosecution of pro-democracy activists and the barring of some from running for office has stoked fears those liberties are under threat.

Pro-democracy lawmaker Gary Fan, who was at the committee meeting and was also removed for shouting, told AFP Monday the legislature’s power to monitor the government was “being crippled”.

The Legislative Council did not immediately respond to AFP’s request for comment.

As flat prices soar in Hong Kong, investors park money down in the lot

May 12, 2018

City-wide, while Hong Kong’s private homes roughly doubled in value between 2010 and 2017, the price of a parking spot in residential complexes around the city tripled to an average of HK$1.4 million, according to data from an independent website dedicated to the asset,

Image may contain: skyscraper, sky and outdoor

File photo showing public and private housing blocks in Hong Kong.  PHOTO: REUTERS

HONG KONG (REUTERS)- Esther Fan’s nest egg is tucked away in an old residential complex on the outskirts of Hong Kong – two parking spaces in a dimly-lit lot alongside dozens of luxury cars and a Mini Cooper with fake eyelashes on its headlights.

Her parking spots, marked out in mustard-coloured paint, have more than doubled in value in the past 18 months, with one surging to HK$1.6 million (S$272,630) from HK$720,000.

Those gains have greatly outpaced the price growth of the flats in the building above them in Tai Wai district, some 30 minutes’ drive from the central business district on Hong Kong island.

It took about seven years for the flats, measuring only around28 square metres, to record the same growth of 120 per cent, according to data from Centaline Property Agency. The flats currently go for about HK$4.7 million per unit.

City-wide, while Hong Kong’s private homes roughly doubled in value between 2010 and 2017, the price of a parking spot in residential complexes around the city tripled to an average of HK$1.4 million, according to data from an independent website dedicated to the asset,

“Flats are expensive, but their value won’t jump 100 per cent in roughly a year,” said Ms Fan, who does not drive and rents both spaces out for HK$2,300 a month each. “But that’s what’s happening with parking spots. It’s incredible.”

The boom is being fuelled by a surge of cars on Hong Kong’s roads and a red-hot housing market that pushes investors to park their money in assets with lower entrance fees.


Over the past 15 months, two thirds of parking spaces fetched more than HK$1 million, while one in five cost more than HK$2 million, according to data compiled by Midland Realty Services.

Last year, a parking spot inside a luxury residential complex was sold for an eye-watering HK$5.18 million, or US$664,200 at the time – a record for the city.

The parking spot’s price per square foot, at about US$3,500 (S$4,680), outpaced the typical per square foot price of prime residential flats in major cities like Tokyo (S$4,380), London (S$2,360) and New York (S$2,100), according to data from property consultancy Savills.

The only city that could top that is Hong Kong, at US$4,000 per square foot.

In 2014, a parking space in London’s South Kensington went for a staggering £480,000 – now equivalent to US$651,600 but US$759,500 at the time.

A big reason for the parking space boom in Hong Kong is a jump in car ownership. From 2006 to 2016, the numbers of private cars on Hong Kong roads increased 45 per cent, according to a government report last year.

Meanwhile, the number of parking spaces only edged up 9 per cent, contributing to an “aggravating shortage”, it added.

Buggle Lau, director of property data and research at Midland Realty Services, said it was hard to predict when the fervour would end.”At this moment I can’t see the economy becoming worse, so I don’t see a drop in demand. But I also don’t see a rise in supply,” Mr Lau said.

AN EMPTY SPACE The market for parking spaces has also been fuelled by a series of government measures since 2012 to cool the property sector, including a 15 per cent stamp tax on buying second flats.

Jason Or, the owner of Big Fortune Property Limited, cited the stamp duty as a trigger for a jump in demand for parking spots. “Some people even buy 50 at a time,” he said.

Mr Or, 37, began investing in parking in 2015, and said the seven spaces he owns had doubled in value to a total of nearly HK$10 million.

Many banks in Hong Kong – including HSBC and Standard Chartered – even offer mortgages tailor made for parking spots.

But Sharmaine Lau, chief vice-president of mReferral Mortgage Brokerage Services, said the market was not very competitive as values were small compared to the residential sector.

While some investors are cashing in, those just looking for places to keep their cars are unhappy about the sky-rocketing prices.

Andrew Ng, 55, said parking woes were a common topic of conversation for him and fellow members of the Classic Car Club.

“It’s crazy it takes a few million to buy a grid, a space with nothing, which you can’t do anything with apart from parking,” Mr Ng said.

Forget Iran Sanctions. North Korea, Dollar Key for Asian Stocks

May 9, 2018

It’s no surprise that most Asian stock markets began the day slipping after Trump’s decision to exit the 2015 Iran nuclear accord and reinstate sanctions. But the declines weren’t severe.

 Image may contain: 2 people, people standing, ocean and outdoor
Kim Jong-un and Xi Jinping in Dalian, May 8, 2018

The MSCI Asia Pacific Index lost 0.3 percent at 12:42 p.m. in Hong Kong, paring a drop of as much as 0.6 percent. Futures contracts on the S&P 500 Index rose less than 0.1 percent, mimicking Tuesday’s index move. Volatility indexes across the region were mostly down.

It might be because there’s a lot to focus on within the Asian continent.


 Updated on 

“Trump’s exit from the landmark 2015 accord is an important piece of news flow,” said Jason Low, a senior investment strategist at DBS Wealth Management. “But in the greater scheme of things happening right now, perhaps pales in relative importance compared to the political meetings happening in North Asia.”

Chinese Premiere Li Kequiang, Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in (Getty Images/AFP/E. Hoshiko)

China, Japan and South Korea agreed Wednesday to work together to get North Korea to give up its nuclear weapons. The trilateral summit in Tokyo also saw Japanese Prime Minister Shinzo Abe, South Korean President Moon Jae-in and Chinese Premier Li Keqiang discuss regional free trade agreements.

This week has been a busy one for the region:

  • Trump discussed trade and North Korea with China’s President Xi Jinping on Tuesday
  • A U.S. envoy to the World Trade Organization condemned China’s trade policy at a summit in Geneva
  • U.S. Secretary of State Mike Pompeo arrived in North Korea to prepare for Trump’s summit with Kim Jong Un
  • Xi met Kim for a second time in two months earlier this week
  • Japan Prime Minister Shinzo Abe hosts South Korean President Moon Jae-in and China’s premier Li Keqiang

Also read: Higher Oil Is Not a Problem for Stocks, UBS Investment Head Says

Here’s what fund managers and strategists are saying:

Need Clarity

“It’s not clear just how impactful the sanctions will actually be given that the other signatories to the Iran deal have not supported the move,” said Kerry Craig, a Melbourne-based global market strategist with JPMorgan Asset Management. “Need clarity over whether sanctions will apply to only Iranian companies or non-Iranian ones, and there is still a six-month window of negotiation to be had and the markets may be hoping for a successful resolution.”

Macro Risks

“What really matters for Asia stocks are macro risks: primarily the dollar index at a 2018 high but also future directions of U.S. Treasury yields,” Frank Benzimra, head of Asia equity strategy at Societe Generale SA, wrote in an email.“Our reading of U.S. conditions is not bullish dollar, which makes emerging Asia an attractive place to invest, especially when we see some market corrections such as in Indonesia.”

Stronger Dollar

“For me, the stronger U.S. dollar, which is running like a wrecking ball through global capital markets, is one of the more significant issues,” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. “I think the market is preparing for higher U.S. interest rates and the long-awaited draining of the QE punch bowl. Both of which are bad for equity markets.”

Not a Big Deal

“Other than the oil sensitive sectors (oil, airlines, etc.), it’s not a huge concern. What has been a bigger issue is the strong U.S. dollar,” James Soutter, head of global equities at K2 Asset Management in Melbourne, wrote in an email. “Asia is far more focused on North Korea — I would say with hopeful eyes rather than trepidation. That said, its still an uncertain time and once there is greater clarity Asian markets may start to respond to fundamentals again.”

$85 Oil

“Everybody is waiting for U.S.- China trade tensions and Korean peninsula issues to resolve. The market is just overwhelmed by oil prices, Korea and U.S.-China trade talk,” Edward Lim, chief investment officer of Covenant Capital Pte. in Singapore said by phone. “The immediate risk is how oil price behaves regardless of what happens in Korea and U.S-China trade. If it goes to $85 we will be in trouble.”

— With assistance by Abhishek Vishnoi, Matthew Burgess, Livia Yap, and Moxy Ying

US takes to Chinese social media over ‘Orwellian’ demand

May 7, 2018

The United States took to a popular Chinese social media platform Monday to ramp up its criticism of Beijing’s demand that airlines list Taiwan as part of China, but the message earned little sympathy on the tightly monitored website.

© AFP/File | The US embassy posted on its official Weibo account the Mandarin translation of a White House statement that dismissed China’s request to foreign air carriers as “Orwellian nonsense”.


The US embassy posted on its official Weibo account the Mandarin translation of a White House statement that dismissed China’s request to foreign air carriers as “Orwellian nonsense”.

The post inspired tens of thousands of comments, but instead of supportive messages it triggered patriotic posts on a platform that is closely watched and censored by the authorities.

Several commentators called for “an independent Hawaii” and an “independent Alaska”.

One angry commenter said “(if you) don’t want to do business, get out of here. Follow our laws if you want stay!”

Another said: “This has nothing to do with freedom of speech. It’s Chinese law.”

While the post has not been taken down, users who try to share it on their own accounts receive a message saying: “Sorry, this content is temporarily unavailable.”

The White House statement came after Chinese Civil Aviation Administration sent a notice to 36 foreign airlines on April 25, asking them to comply with Beijing’s standards of referring to Taiwan, Hong Kong and Macau as Chinese territories.

Hong Kong, a British colony until 1997, and Macau, a Portuguese colony until 1999, are now “special administrative regions” of China.

But Taiwan has been self-ruled since splitting from the mainland after a 1949 civil war.

China views the democratic island as a renegade part of its territory and has not ruled out the use of force to bring it back into the fold if necessary.

The White House called Beijing’s demand to the airlines an attempt by the Chinese Communist Party to “export its censorship and political correctness to Americans.”

The Chinese government lashed out at the US statement, saying Taiwan, Hong Kong and Macau “are all indivisible parts of China”.

“Regardless of what the US side may say or do, it will not change the fact that there is only one China in the world,” foreign ministry spokesman Geng Shuang said at a regular briefing Monday.

He urged foreign companies to “respect China’s territorial integrity… Chinese laws and feelings of the Chinese people,” if they wished to do business in China.

The website of American Airlines changed its listing as of Monday to show Hong Kong and Macau as special administrative regions of China, and only classified Taiwan separately.

United Airlines and Delta have adopted a similar approach.

Washington has maintained a delicate diplomatic balance since 1979, recognising Beijing’s sovereignty as part of its “One China” policy, while remaining Taiwan’s most powerful unofficial ally and main weapons supplier.


Asia markets mostly up after Wall St surge, Iran fears boost oil

May 7, 2018

Most Asia markets rose Monday following a blistering lead from Wall Street as a soft jobs report soothed concerns about rising US interest rates, while oil prices extended a rally ahead of Donald Trump’s decision on the Iran nuclear deal.

All three main indexes in New York clocked up sizeable gains Friday after the closely watched non-farm payrolls report showed unemployment at an 18-year low but fewer-than-expected jobs were created in April and average earnings missed estimates.

© AFP | Donald Trump has said he will decide by May 12 on whether or not to dump the Iran nuclear deal


The figures soothed anxieties that the Federal Reserve could lift borrowing costs four times this year owing to a pick-up in inflation and a strengthening economy. Those worries have acted as a weight on global markets in recent weeks.

Hong Kong rose 0.4 percent and Shanghai added 0.6 percent, while Sydney was 0.5 percent higher. Wellington, Taipei, Jakarta and Manila were also well up.

But Tokyo ended the morning down 0.5 percent as traders returned following an extended holiday weekend, while Singapore was also lower.

Seoul was close for a public holiday.

However, there are worries that markets may have plateaued, with strong earnings unable to help push gains further.

“The big surprise from this stellar earnings season is that the market hasn’t broken higher,” said Greg McKenna, chief market strategist at AxiTrader.

“Certainly, the earnings have been there but it seems the narrative was molded by the comments of the Caterpillar (chief financial officer) who said Q1 was likely the high water mark. That he said that is not remarkable. That it resonated with the market is the important point.”

– Energy firms rally –

Investors remain on edge on concerns about the China-US trade spat after high-level talks in Beijing last week ended with no agreement between the two sides.

“Whatever optimism investors had about China-US trade negotiations should be undermined by the fact there was no communique, with rumours suggesting the two superpowers are sitting worlds apart after the US failed to win any concessions,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

“Even the hint of trade war escalation is terrible news for global equities so there is the threat that any contrary Monday morning headline risks could dampen stock market sentiment right out of the gates.”

Traders are also nervously awaiting Trump’s decision on whether or not to continue with the Iran nuclear deal, which he has in the past derided.

The president has said he will decide by May 12, with many fearing he will pull out of the 2015 deal and spark fresh turmoil in the already tinderbox Middle East.

Speculation he will dump the agreement has fired oil prices to four-year highs, with both main contracts above $70 and forecasts for it to go even higher.

Iranian President Hassan Rouhani warned that if Trump quits the deal then Washington will regret it “like never before”.

The rise in oil has, however, boosted energy firms in Asia with CNOOC, PetroChina and Sinopec surging in Hong Kong, while Sydney-listed Woodside Petroleum and Tokyo-listed Inpex also sharply higher.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.5 percent at 22,372.14 (break)

Hong Kong – Hang Seng: UP 0.4 percent at 30,052.81

Shanghai – Composite: UP 0.6 percent at 3,108.93

Euro/dollar: UP at $1.1976 from $1.1957 at 2100 GMT on Friday

Pound/dollar: UP at $1.3552 from $1.3534

Dollar/yen: DOWN at 108.91 yen from 109.08

Oil – West Texas Intermediate: UP 38 cents at $70.10 per barrel

Oil – Brent North Sea: UP seven cent at $74.94 per barrel

New York – Dow: UP 1.4 percent at 24,262.51 (close)

London – FTSE 100: UP 0.9 percent at 7,567.14 (close)

United States ‘ups the trade ante’ with attack on China’s ‘Orwellian’ demands on airlines, analysts say

May 6, 2018

Chinese tabloid Global Times says criticism of requests reflects the views of a few stubborn American elites

South China Morning Post

Sunday, 06 May, 2018, 7:05pm

The United States is putting another bargaining chip in play in its trade fight with China by hitting back at Beijing’s “Orwellian” semantic demands on foreign airlines, analysts said.

The White House on Saturday condemned China’s Civil Aviation Administration for ordering 36 foreign carriers, including US airlines, to remove references on their websites or in other material that suggested Taiwan, Hong Kong and Macau were part of countries independent from China.

The White House said the demands were “Orwellian nonsense” and US President Donald Trump “will stand up for Americans resisting efforts by the Chinese Communist Party to impose Chinese political correctness on American companies and citizens”.

Chinese foreign ministry spokesman Geng Shuang said in a statement on Sunday that Washington’s rhetoric would not change the fact “there’s only one China, and Hong Kong, Macau and Taiwan are inseparable parts of China”.

Geng said all foreign enterprises operating in China must respect China’s sovereignty and the “Chinese people’s national feeling”.

In an editorial on Sunday, government-backed tabloid Global Times said the comments reflected the stubborn view of a few American elites who saw China as a “Soviet-style totalitarian country and ignored China’s vibrant socialist market economy”.

It said the aviation administration’s request to foreign airlines followed an appeal from the Chinese public.

“The White House criticised China with fierce rhetoric and it is clearly intended to create and escalate US-China disputes,” the editorial said.

The US moves showed that relations between the two countries were entering a period “full of war flames”, it added.

The editorial said China’s position was almost universal “political correctness” because the United Nations, other international organisations and most governments did not recognise Taiwan, Hong Kong, Macau and Tibet as countries. As such, airlines should “respect this fact and not do the opposite”.

It was not clear what penalties foreign carriers could face for failing to comply with the aviation administration’s demands but the public has been mobilised in the past to boycott foreign firms that refused to toe the line.

The sparring came just days after trade talks between US and Chinese officials ended in Beijing without a breakthrough.

Tensions have escalated between the world’s two biggest economies in recent months, with billions in tariffs – and retaliatory tariffs – threatened by both sides over Washington’s complaints about China’s trade surplus with the US, reciprocal market access, and intellectual property rights.

Analysts said the latest criticism from the White House followed complaints about Chinese political interference overseas and was another potential concession in the trade clash.

Wei Zongyou, a Sino-US relations specialist at Fudan University in Shanghai, said US authorities had been “very concerned about the Chinese government’s use of forceful or non-forceful measures” to induce “self-censorship” at foreign businesses, schools, and media.

“Amid the intense trade confrontation between China and the US, the Trump administration is clearly willing to seize every opportunity to exert pressure on China,” Wei said.

He said the Chinese government was unlikely to give ground on the issue but “it probably did not expect the Trump administration to respond so strongly”.

University of Melbourne international relations professor Sow Keat Tok said the White House statement was “another bargaining chip thrown into the negotiating process”.

“It is a clear message to China that’s following up what Trump has said vis-à-vis China, that they’re not willing to tolerate any sort of economic blackmail from China in any way,” Tok said.

“I think eventually China might get its way because corporations would not want to lose the Chinese market … they might adjust their behaviour accordingly. No one is going to fight against money, especially airlines.”

Taiwan’s foreign ministry thanked Washington for taking a stand on Beijing’s attempts to put pressure on the island.

“We’ll continue making contributions to the international community despite the actions of China,” the ministry said.

China’s aviation administration did not respond immediately to a request for comment.

Various international companies have felt the heat from Beijing over similar controversies.

In January, the Cyberspace Administration of China ordered the US Marriott Hotel chain to temporarily suspend operations after its website listed Tibet, Taiwan, Hong Kong, and Macau as separate countries.

A month later, German car company Mercedes-Benz apologised for an Instagram post featuring a quote from Tibetan spiritual leader the Dalai Lama, whom Beijing considers a separatist.

Tok said that much of the patriotic fervour had been stirred up by online users in China who actively patrolled nationalist lines.

“The state is trying to react to the situation on the ground; otherwise [Chinese President] Xi Jinping will be accused of selling away the Chinese nation,” he said.

“China never … thought about it until the end of last year, when netizens began to start becoming very active towards South Korea, Japan, and Taiwan, and the Chinese state suddenly realised that they have an economic weapon that they can use.”

Additional reporting by Reuters