Posts Tagged ‘International Monetary Fund’

Greece to miss IMF payments amid fears of ‘catastrophic’ eurozone rupture

May 24, 2015

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A Greek reversion to the Drachma would be an irreversible “disaster” for the entire euro project, Yanis Varoufakis warns

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Greece’s long-term future in the eurozone still hangs in the balance Photo: AFP
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Greece will be unable to find the €1.6bn (£1.1bn) sum it is due to hand the International Monetary Fund (IMF) next month, one of the country’s ministers has admitted.

Nikos Voutsis, the Greek minister of the interior, said that “this money will not be given and is not there to be given”, speaking on Mega TV. The Greek state is due to hand over the money in four installments in June, as part of its obligations for its 2011 bail-out.

Mr Voutsis’ comments came as Yanis Varoufakis, the Greek finance minister, told The Andrew Marr Show that if progress was not made, it would be the beginning of the end for the euro project.

The finance minister said that the Syriza-led Greek government has now “made enormous strides at reaching a deal”, and that it is now up to the ECB, IMF and EU “to do their bit” and “meet us one-quarter of the way”.

• How the ECB became the real villain in Greece
• AEP: defiant Greeks force Europe to the negotiating table

One possible alternative if talks do not progress is that Greece would leave the common currency and return to the drachma. This would be “catastrophic”, Mr Varoufakis warned, and not just for Greece itself.

“It would be a disaster for everyone involved, it would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end for the common currency project in Europe,” he said.

“Whatever some analysts are saying about firewalls, these firewalls won’t last long once you put and infuse into people’s minds, into investors’ minds, that the eurozone is not indivisible,” he added.

Yanis Varoufakis, the Greek finance minister (Photo: Reuters/Alkis Konstantinidis)

“It will only be a certain amount of time before the whole thing begins to unravel.”

Mr Varoufakis’ and Mr Voutsis’ words followed a declaration from Alexis Tsipras, the Greek prime minister, that bargaining with Greece’s creditors would soon come to a close. On Saturday he said: “We are on the final stretch of a painful and tough period shaped by the government’s negotiations with the institutions.”

“Rest assured that in this negotiation we will not accept humiliating terms,” Mr Tsipras told Syriza’s central committee. “The overwhelming majority of Greek people want a solution and not just an agreement … it supports the government in this tough negotiation,” he added.

 

For Greece itself, using the common currency is now like using a “foreign currency”, and any exit from the eurozone would be “a disaster”, Mr Varoufakis said.

He continued: “Trying to get out of it is tantamount to announcing a devaluation 10 months in advanced.” Economists warn that if Greece were to leave the euro area, it could trigger huge levels of capital flight.

In turn, Greece would almost certainly have to resort to capital controls in order to stem the tide of money out of the domestic economy.

• How the eurozone could tear apart
• Greek economy is bleeding 600 jobs a day

Ratings agency Moody’s has warned that there is now a “high likelihood” of such controls, which might be necessary to keep the Greek financial system alive. An estimated €30bn has been withdrawn from the country’s banks since snap elections were called in December 2014.

Mr Varoufakis said that at some point the Greek government would have to make a choice between paying salaries and paying international creditors.

The decision is one “that no minister of finance should ever have to make”, Mr Varoufakis said, adding that “and of course the choice that makes under those circumstances is clear cut, isn’t it”, indicating that creditors would be left empty handed.

The Greek state had done “remarkably well” at making payments so far, given its lack of access to the money markets, Mr Varoufakis said.

Wolfgang Schaeuble, the German finance minister (Photo: Jasper Juinen/Bloomberg)

The finance minister said that it would be unnecessary to for Greece to hold a referendum to refresh its mandate, as suggested by Wolfgang Schaeuble, the German finance minister.

Mr Schaeuble has said that a Greek plebiscite on continued membership of the euro would be “helpful” for both the country and its creditors. Mr Varoufakis, however, stressed that “the Greek people completely support us”.

He said: “We have a fresh mandate to end this austerity trap, to end this debt-deflationary spiral, and to say to these institutions that it is not in their interests as our creditors to say that the cow that produces the milk should be into into submission.”

The beatings should not continue “to the extent that the milk will not be enough for them [Greece’s creditors] to get their money back”, he added.

http://www.telegraph.co.uk/finance/economics/11626969/Greece-to-miss-IMF-payments-amid-fears-of-catastrophic-eurozone-rupture.html

Russia to Adopt Tough Position if Ukraine Defaults-Medvedev

May 23, 2015

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Russian Prime Minister DmitryMedvedev

MOSCOW — Russia would adopt a tough position if Ukraine decided not to pay off debts owed to Moscow by its previous government, Russian Prime Minister Dmitry Medvedev said in an interview broadcast by Russian TV on Saturday.

Russia has spoken out against a new Ukrainian law allowing a moratorium on foreign debt repayments, threatening to take Ukraine to court if it fails to repay $3 billion that Russia lent it in 2013.

In his interview, Medvedev called the new law “contradictory”.

“Probably they are talking about private debts, but at the same time they are hinting that they aren’t prepared to pay off the debts of the (former Ukrainian president Viktor) Yanukovich government,” Medvedev said.

“If it is actually formulated in this way this would undoubtedly be a default of Ukraine … We would adopt as tough a position as possible in this case and defend our national interests,” Medvedev told the Vesti on Saturday programme on state TV channel Rossiya.

He added that any such refusal would “undoubtedly influence the process of their agreement with the International Monetary Fund” – a seeming reference to IMF rules that require financial assistance recipients to honour debts to other governments.

Medvedev also said that Russia was “not indifferent” to debts owed by Ukraine to private Russian creditors, as the bulk of these debts are owed to banks with state ownership.

“We will collect (the debts),” Medevedev said. “Banks will use all instruments that exist, including, naturally, judicial procedures,” he said.

“PREDICTIBLE” ROUBLE

Medvedev also said his government had an interest in seeing a predictable rate for the rouble, but he defended the central bank’s policy of allowing the rouble to float, saying it was “optimal” to achieve a balance in the forex market between supply and demand.

Analysts have been speculating that the authorities are concerned the rouble has strengthened too much after the dollar fell below 50 roubles per dollar — a large rebound from the rouble’s all-time low of 80 in December.

Medvedev said the current exchange rate was “practically at the present moment the real value of the rouble.” But he added: “Some economists consider that this is even excessive strengthening.”

(Reporting by Jason Bush; Editing by David Holmes and Raissa Kasolowsky)

Greece invited to join BRICS bank — Stock markets down

May 11, 2015

ATHENS (AFP) – Greece has been invited to become a member of the development bank of the BRICS economies, including Russia and China, which is seeking to become a counterweight to the IMF, a government source said Monday.

The invitation came during a telephone conversation between Greek Prime Minister Alexis Tsipras and Russia’s deputy finance minister Sergei Storchak, the government source said in a note to the media.

This announcement came late Monday as Greece was meeting with its eurozone partners in Brussels to try reach a deal with its EU-IMF creditors that would release the 7.2 billion euros ($8 billion) remaining in its bailout programme, which expires at the end of June.

Tsipras called the bank’s invitation “a happy surprise” and expressed interest, saying he would “study the proposal in detail,” the statement said.

The BRICS — Brazil, Russia, India, China and South Africa — had announced last July that they were creating a new bank, based in Shanghai, aimed at financing major infrastructure projects in emerging countries. But it was also seen as a move to shake up global economic governance, dominated by the International Monetary Fund and the World Bank.

Greece’s debt-wracked government is running out of cash and in desperate need of the remaining bailout funds.

The IMF and its eurozone partners have conditioned the release of the funds on Athens keeping to its reform pledges.

Negotiations have stalled as Tsipras, whose leftist Syriza party won January elections, vows to stick to his anti-austerity campaign promises.

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EW YORK (AFP) – US stocks finished lower Monday, snapping a two-day surge in equities as investors eyed tough negotiations between Greece and international creditors.

The Dow Jones Industrial Average fell 85.94 points (0.47 percent) to 18,105.17.

The broad-based S&P 500 dropped 10.77 (0.51 percent) to 2,105.33, while the tech-rich Nasdaq Composite Index shed 9.98 (0.20 percent) at 4,993.57.

“The market seems to be tired,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Every time we get up to these levels, we pull back.”

Athens’s radical new government scraped together enough cash to order Monday the debt repayment of 750 million euros ($840 million) to the International Monetary Fund in time for Tuesday’s deadline.

However, at a eurozone finance ministers meeting in Brussels, Greece and other eurozone officials remained far apart on whether the Greek government’s reform plans are enough for the debt-wracked country to receive further bailout funds.

Greek banks have burned through their emergency cash

Petroleum company Rosetta Resources surged 27.2 percent after announcing an agreement to be acquired by Noble Energy for $2.1 billion plus the assumption of $1.8 billion of Rosetta debt. Noble fell 6.2 percent.

US online retailer Zulily jumped 5.2 percent on news that Alibaba, China’s e-commerce giant, has raised its stake in the boutique that markets to mothers and features daily deals. Alibaba shed 0.4 percent.

Pharmaceutical company Actavis rose 3.1 percent as first-quarter earnings excluding the Allergan acquisition and other one-time costs translated into $4.30 per share, better than the $3.94 per share projected by analysts.

Hilton Worldwide dropped 1.4 percent after announcing that its biggest shareholder, the Blackstone Group, will sell 90 million shares. Blackstone fell 0.3 percent.

Online real estate company Zillow rose 6.9 percent following an upgrade by Sun Trust Robinson Humphrey.

Bond prices fell sharply. The yield on the 10-year US Treasury advanced to 2.28 percent from 2.14 percent Friday, while the 30-year jumped to 3.05 percent from 2.90 percent. Bond prices and yields move inversely.

Related:

Global Oil Industry Slow Down, Corporate Restructuring “Bloodbath” In Our Near Future — China not concerned

April 22, 2015

The world’s over-supply of oil is like the deep slump in 1986. BP fears it may get worse as Iran’s supply hits market and US shale hold firm

BP Group Chief Executive Bob Dudley

Bob Dudley said tax cuts in the Budget do not go far enough to avert a bloodbath for smaller drillers and exploration companies Photo: PA
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By , in Houston, Texas
The Telegraph

The North Sea oil industry faces a drastic squeeze as the world’s crude glut worsens, BP has warned.

“We’re going to see massive restructuring,” Bob Dudley, chief executive, said. “The North Sea is a very high cost basin and it is going to be a painful adjustment.”

Mr Dudley told the IHS CERAweek forum in Houston, Texas, that the latest tax cuts in the Budget will help margins but do not go far enough to avert a bloodbath for smaller drillers and exploration companies.

The warning follows a study by the International Monetary Fund showing that the UK’s oil and gas industry has the highest cost structure of any major region in the world – if taxes are included – and is the most vulnerable to a prolonged downturn.

Mr Dudley said there is little chance of a revival in crude prices for a long time given the “remarkable resilience” of US shale producers, who have defied predictions of collapse and continue to drill record volumes.

The US rig count has plummeted from more than 1,600 in November to 734 this week, yet this has not led a cut in output due to rising efficiency and a shift in drilling tactics.

“It’ll level off, but for now we’ve quite a bit of surplus oil. There could be unintended consequences for the world in terms of stress,” Mr Dudley said, alluding to a possible wave of bankruptcies.

BP chief executive Bob Dudley

He added that a nuclear deal with Iran and the lifting of sanctions on the country could lead to a fresh surge of supply, perhaps more quickly than expected. “It will not take too long to have another 500,000 [barrels a day], and I don’t see Russian production coming off,” he said.

He compared the current dynamics in the global oil market to the glut in 1986, which took several years to clear. While big projects in the North Sea are still viable at today’s prices near $60, the area risks relentless decline.

Meanwhile, Mr Dudley also revealed that the Deepwater Horizon spill in the Gulf of Mexico five years ago had cost BP a total of $44bn (£29.5bn) so far in clean-up costs, legal settlements and provisions. “I don’t think any company has done more, so quickly, after an industrial accident,” he said.

Rivals are eyeing BP as a potential takeover target, calculating that the company may be too weak to defend itself as the energy sector faces a wave of mergers. But Mr Dudley said the group bolstered its defences before the oil price plummeted.

“We have been able to divest $40bn of assets. This has reduced risk and left us in a better position to weather the storm facing our industry. We are making some very tough decisions,” he said.

The company is seeking buyers for $2bn of US pipelines and storage terminals, according to Bloomberg.

Related:

Oil prices are heading higher and could soon return to $100 per barrel as war in the Middle East and speculators drive market

It wouldn’t be the first time that oil experts have got it spectacularly wrong when predicting the price of crude.

Goldman Sachs went against the prevailing mood in 2008 when it famously predicted that crude would hit $200 per barrel within months. Instead, oil crashed to levels around $40 per barrel as the global financial crisis punctured world demand.

This time around, the US investment bank decided to follow the consensus view on Wall Street when earlier this year it downgraded its short-term forecast for the price of a barrel to around $40 per barrel.

But instead of falling, oil has rallied strongly. Brent crude now trading above $63 per barrel is up 36pc since reaching its year low in early January. At this rate oil will be back at $100 per barrel by the end of the summer driving season in the US when middle-class America hits the great open roads to visit their ‘Aunt Agatha’ in Pennsylvania.

So why has the short-term outlook for oil changed overnight?

Lower prices have started to filter through to boosting growth in the world’s most advanced economies and with it demand for gasoline, which is once again on the rise.

Here are six reasons why oil is heading back to $100:

The market is tighter than you think: World demand for crude oil is beginning to rebound. After growth in consumption slowed last year the early signs are that demand is beginning to pick up led by developed markets that are responding to a period of lower prices. The Organisation of Petroleum Exporting Countries (Opec) expects demand for oil to grow by 1.17m barrels per day (bpd) in 2015 but this is a conservative estimate. Another 500,000 bpd of crude would erase the current 1.5m bpd surplus in the market. Remove this tight surplus and oil is back above $100 in a heartbeat.

Demand is picking up in US

War in the Middle East threatens supply: Gulf countries, which account for a fifth of the world’s oil supplies, are under siege. In Yemen, a shaky Saudi-led coalition is battling to turn the tide on Iranian-backed Houthi rebels with airstrikes. Abdel-Malik al-Houthi, leader of the rebels who are the brink of seizing Aden, is already being described by Iranian media as the “supreme leader of the Arabian peninsula. In the north, Islamic State continues to pose a threat to the Gulf in Iraq. The region, which controls most of the world’s oil is in turmoil and any further escalation in conflict could easily push crude back to $100 per barrel and beyond.

Gulf oil producers are under seige

Hedge funds are betting on oil: The vultures of global markets smell a killing and have started to turn bullish once again on oil heading back to $100. Investors have increased their net-long position on West Texas Intermediate (WTI) crude by more than 9pc in the first few weeks of April as the number of traders still betting on a further price collapse dwindles. Oil traders are beginning to turn bullish, which has already pumped up WTI by 36pc in the last six months.

US oil has rallied on $100 oil bets

China to unleash massive stimulus: The leaders of the world’s second-largest economy and biggest importer of crude have finally woken up to the dangers of a potentially catastrophic slowdown. The People’s Bank of China started the week by pushing more money into the system by cutting the amount of money that lenders must hold against reserves. Crude oil immediately responded. China will account for roughly two-thirds of Opec’s forecast increase in demand this year and a major push by Beijing to revive growth could easily push oil back above $100.

China’s oil demand may rebound

Barbarians at the gate: Royal Dutch Shell’s game-changing £47bn bid to buy BG Group is a good sign that ‘big oil’ sense that prices could once again be about to turn back towards $100. No one wants to catch a falling knife and Shell have obviously timed their move just at the point when crude prices have started to turn. More takeovers in the industry are expected with BP persistently linked as a target for Exxon Mobil. Such deals would also drag more free cash away from investment into drilling new oil wells and expanding capacity, which eventually can lead to demand outstripping supply.

Shell and Exxon may sense oil is about ti turn

America’s shale oil revolution is over: The number of rigs working in US oil fields has fallen for a record 19th straight week as drillers continue to cut back in response to the lower prices of the last six months. Although, US oil production if expected to reach a record 9.65m bpd average in 2015 this could represent the high watermark for the industry in North America. Shale oil needs prices above $100 per barrel to grow.

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11549582/War-hedge-funds-and-China-why-oil-will-hit-100-a-barrel.html

Hong Kong stock market is “very likely” to slip at its opening on Monday, finance chief warns — electoral reform decision this week

April 19, 2015

By Phila Siu
South China Morning Post

Hong Kong stock market is “very likely” to slip at its opening on Monday, Hong Kong’s finance chief predicted today, as he warned of the possibility of large market fluctuations in the near future.

John Tsang Chun-wah called on investors to remain alert to the possibility of rollercoaster activity in the coming weeks following the stock market rally.

“In the last eight trading days, the Hang Seng Index has risen 2,400 points in total, with the average daily turnover reaching more than HK$230 billion and the largest daily turnover reaching more than HK$290 billion,” the Financial Secretary wrote on his blog on Sunday.

“Actually, it is just a matter of time for a market to adjust when it has aggregated a certain amount of increases. That is absolutely not strange at all.”

The Hang Seng Index declined 0.31 per cent, or 86.59 points, to 27,653.12, on Friday after trading in a narrow range of 27,600 to 27,950 for the whole day.

On a weekly basis, the benchmark index was up only 1.4 per cent, compared to 7.9 per cent the previous week.

Tsang also said that, according to a report released by the International Monetary Fund on Wednesday, the global market is expecting the US to gradually increase interest rates.

On the city’s electoral reform, Tsang confirmed Chief Secretary Carrie Lam Cheng Yuet-ngor would be announcing concrete proposals on Wednesday.

“Whether the electoral reform proposal can be passed, it will have an impact on Hong Kong’s politics, economy and people’s livelihood. This may also be a watershed to determine if Hong Kong will turn from prosperity to decline,” he wrote.

G-20 Warns of Threats to Global Economic Recovery — U.S. Global Economic Primacy Is Seen as Ebbing

April 18, 2015

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Group of 20 leaders back more easy-money policies

German Finance Minister Wolfgang Schäuble, right, and U.S. Federal Reserve chairwoman Janet Yellen at the IMF/World Bank spring meetings in Washington on Friday.   
German Finance Minister Wolfgang Schäuble, right, and U.S. Federal Reserve chairwoman Janet Yellen at the IMF/World Bank spring meetings in Washington on Friday. Photo: nicholas kamm/Agence France-Presse/Getty Images
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By Ian Talley
The Wall Street Journal
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WASHINGTON—The world’s top finance leaders warned Friday that currency volatility, low inflation and high debt levels threaten to undermine an already uneven global economic recovery.

In an official statement after two days of meetings, finance ministers and central bankers from the Group of 20 largest economies backed more easy-money policies in wealthy nations as critical accelerants for growth.

“In many advanced economies, accommodative monetary policies are needed to anchor inflation expectations and support recovery,” the G-20 said.

The G-20 affirmed its support for central-bank stimulus in Europe, Japan and the U.S. Officials are increasingly worried that the global economy could get stuck in a long period of anemic output, given a weak recovery in some rich countries and a slowdown in many of the largest emerging markets that have been key drivers of global growth.

The International Monetary Fund warned this past week that if the Federal Reserve raised short-term rates sooner or more quickly than markets anticipate, it could cause a rapid jump in longer-term interest rates and a whirlwind of volatility as investors adjust their portfolios across assets and markets.

The IMF noted the large gap between the Fed’s expectations for rate increases and market expectations.

Renewed G-20 support for easy-money policies—essentially backing currency depreciation as a tool for promoting growth—underscores concern about the global economy getting stuck in a low-growth rut. It also marks an implicit acknowledgment of the failure across the globe to enact longer-lasting structural overhauls to major economies after years of relying on short-term spending and other temporary stimulus programs.

Treasury Secretary Jacob Lew, in a statement prepared for the IMF’s policy-setting committee, warned that long-standing efforts to rebalance the global economy are at risk given the reliance of key economies on exports. Some economies “appear increasingly dependent on external demand to boost growth, rather than pursuing more balanced policies to catalyze domestic demand,” Mr. Lew said. “We are concerned that the global economy is reverting to the precrisis pattern of heavy reliance on U.S. demand for growth.”

The dollar has surged in the past year as the U.S. economy has shown signs of strengthening and markets expect the Fed to raise rates. Combined with weak growth and aggressive easy-money policies in Europe and Japan, the U.S. currency has experienced one of the fastest and strongest surges in decades.

Still, U.S. officials are concerned enough about a prolonged stagnation in its leading trading partners that they have encouraged easy-money policies overseas even though the subsequent dollar strengthening weighs on American exports and growth.

In its latest outlook published this week, the IMF said global economic growth will accelerate only marginally this year as slowing output in major emerging markets and a feeble expansion in wealthier countries drag down near-term prospects.

The low-growth worry is also trumping other risks fomenting in global markets amid the accelerating divergence in exchange-rate values and interest rates. For example, many emerging markets bulked up on dollar-denominated debt, a liability that increases with the rise of the dollar’s value, especially for emerging-market governments and firms whose revenue are in local currencies. Some countries have also pegged the value of their currencies to the dollar, damping their competitiveness and growth prospects.

Those competing pressures are putting authorities in policy binds, and could “trigger a cascade of disruptive adjustments,” the IMF said.

The world’s top finance leaders warned Friday that currency volatility, low inflation and high debt levels threaten to undermine an already uneven global economic recovery.

In an official statement after two days of meetings, finance ministers and central bankers from the Group of 20 largest economies backed more easy-money policies in wealthy nations as critical accelerants for growth.

“In many advanced economies, accommodative monetary policies are needed to anchor inflation expectations and support recovery,” the G-20 said.

The G-20 affirmed its support for central bank stimulus in Europe, Japan and the U.S. Officials are increasingly worried that the global economy could get stuck in a long period of anemic output, given a weak recovery in some rich countries and a slowdown in many of the largest emerging markets that have been key drivers of global growth.

The International Monetary Fund warned this past week that if the Fed raised short-term rates sooner or more quickly than markets anticipate, it could cause a rapid jump in longer-term interest rates and a whirlwind of volatility as investors adjust their portfolios across assets and markets.

The IMF noted the large gap between the Fed’s expectations for rate increases and market expectations.

Renewed G-20 support for easy money policies—essentially backing currency depreciation as a tool for promoting growth—underscores concern about the global economy getting stuck in a low-growth rut. It also marks an implicit acknowledgment of the failure across the globe to enact longer-lasting structural overhauls to major economies after years of relying on short-term spending and other temporary stimulus programs.

Treasury Secretary Jacob Lew warned that long-standing efforts to rebalance the global economy are at risk given the reliance of key economies on exports. Some economies “appear increasingly dependent on external demand to boost growth, rather than pursuing more balanced policies to catalyze domestic demand,” Mr. Lew told the IMF’s policy-setting committee. “We are concerned that the global economy is reverting to the precrisis pattern of heavy reliance on U.S. demand for growth.”

The dollar has surged in the past year as the U.S. economy has shown signs of strengthening and markets expect the Fed to raise rates. Combined with weak growth and aggressive easy-money policies in Europe and Japan, the greenback has experienced one of the fastest and strongest surges in decades.

Still, U.S. officials are concerned enough about a prolonged stagnation in its leading trading partners that they’ve encouraged easy-money policies overseas even though the subsequent dollar strengthening weighs on American exports and growth.

In its latest outlook published this week, the IMF said global economic growth will accelerate only marginally this year as slowing output in major emerging markets and a feeble expansion in wealthier countries drag down near-term prospects.

The low-growth worry is also trumping other risks fomenting in global markets amid the accelerating divergence in exchange-rate values and interest rates. For example, many emerging markets bulked up on dollar-denominated debt, a liability that increases with the rise of the dollar’s value, especially for emerging-market governments and firms whose revenue are in local currencies. Some countries have also pegged the value of their currencies to the dollar, damping their competitiveness and growth prospects.

Those competing pressures are putting authorities in policy binds, and could “trigger a cascade of disruptive adjustments,” the IMF said.

Write to Ian Talley at ian.talley@wsj.com

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Janet L. Yellen, chairwoman of the Federal Reserve, checking the time after a financial ministers and governors photo on Friday. Credit Gary Cameron/Reuters

At Global Economic Gathering, U.S. Primacy Is Seen as Ebbing

WASHINGTON — As world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concern is rising in many quarters that the United States is retreating from global economic leadership just when it is needed most.

The spring meetings of the International Monetary Fund and World Bank have filled Washington with motorcades and traffic jams and loaded the schedules of President Obama and Treasury Secretary Jacob J. Lew. But they have also highlighted what some in Washington and around the world see as a United States government so bitterly divided that it is on the verge of ceding the global economic stage it built at the end of World War II and has largely directed ever since.

Read the rest:

http://www.nytimes.com/2015/04/18/business/international/at-global-economic-gathering-concerns-that-us-is-ceding-its-leadership-role.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

Hong Kong, Shanghai Defy Asia’s Economic Slump

April 17, 2015

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Equities in Hong Kong and Shanghai extend their rally on hopes for new economy-boosting measures from China, but most other Asian markets retreat (AFP Photo/Yoshikazu Tsuno)

Hong Kong (AFP) – Equities in Hong Kong and Shanghai extended their rally Friday on hopes for new economy-boosting measures from China, but most other Asian markets retreated following more weak US data and losses on Wall Street.

The dollar lost ground as the chances of a summer US interest rate hike slimmed after disappointing jobs and housing figures, while the euro managed to hold up despite new worries about Greece’s eurozone future.

In the afternoon Shanghai climbed 2.37 percent and Hong Kong added 0.22 percent.

But Tokyo tumbled 1.17 percent, or 232.89 points, to close at 19,652.88, Sydney sank 1.28 percent, or 76.00 points, to 5,871.50 and Seoul added 0.17 percent, or 3.60 points, to 2,143.50.

A string of poor Chinese indicators have fuelled a rally in Shanghai’s benchmark index over the past year and now mainland investors are turning their attention to Hong Kong, buying what they consider cheap assets.

The southward flood of cash saw turnover in Hong Kong hit record highs twice last week as traders make the most of a link-up between the city’s exchange and the bourse in Shanghai.

Wednesday’s news that the Chinese economy grew at its slowest quarterly pace in six years has reinforced expectations that Beijing will announce new easing measures.

The yen advanced against the dollar after US data showed housing starts rose less than expected in March, while initial jobless claims, a sign of the pace of layoffs, increased well above estimates to their highest level in six weeks.

The Dow dipped 0.04 percent, the S&P 500 edged down 0.08 percent and the Nasdaq eased 0.06 percent.

The dollar bought 119.00 yen Friday against 119.04 yen in New York but down from 119.33 yen in Tokyo earlier Thursday.

– Euro holds ground –

A speech by Atlanta Fed chief Dennis Lockhart, a voting member of the Federal Open Market Committee, the central bank’s policy arm, also weighed on the dollar.

“A murky economic picture is not an ideal circumstance for making a major policy decision” on beginning to raise rates, he said, insisting he was presenting his own views and not speaking for the policy board or the Fed.

Bets earlier in the year had been on a rise as early as June as the economy showed signs of strength but those expectations have been all but erased following a recent run of downbeat figures.

The euro stood its ground despite worries over Greece after the International Monetary Fund refused to give it more time to repay its loans, while the country’s Prime Minister Alexis Tsipras said he was talking to the Orthodox Church about using clerical assets to boost state coffers.

The single currency fetched $1.0760 and 128.09 yen on Friday compared with $1.0761 and 128.10 yen in US trade.

Oil prices were lower in Asia after clocking up six consecutive days of gains on signs that US production may start easing.

US benchmark West Texas Intermediate for May delivery fell 54 cents to $56.17 and Brent crude for May tumbled 53 cents to $63.45.

Gold fetched $1,200.60 against $1,208.60 late Thursday.

In other markets:

— Wellington fell 0.34 percent, or 20.28 points, to 5,861.48.

Fletcher Building slipped 1.65 percent to NZ$8.35 and Spark was down 1.37 percent to NZ$2.89.

— Taipei slipped 0.89 percent, or 85.94 points, to 9,570.93.

Taiwan Semiconductor Manufacturing Co. shed 3.06 percent to Tw$142.5 while smartphone maker HTC slipped 2.64 percent to Tw$129.0.

China’s Mutual Funds Will Flood 500 Billion Yuan Into Hong Kong: HSBC

April 16, 2015
Search Asia Stocks to Watch
 

Hong Kong has been in a bull market ever since Beijing said late last month that mainland China’s mutual funds can now invest in the Hong Kong stock market directly.

There could be as much as 500 billion yuan coming into Hong Kong this year, estimates HSBC‘s Roger Xie and team. Of the 500 billion yuan, 120 billion will come in under the Qualified Domestic Institutional Investor, or QDII, scheme, 230 billion through the Shanghai Hong Kong Stock Connect, and another 150 billion through the upcoming Shenzhen Hong Kong Stock Connect. For comparison purposes, the average daily turnover in Hong Kong was less than 60 billion yuan last year.

The QDII scheme, which allows mainland institutional investors to invest overseas, is having a resurgence. In the first quarter this year, Beijing already granted 64 billion QDII quota, well above the 30 billion quotas granted annually in the last seven years. The HSBC analysts reckon that Beijing will give out another 200 billion QDII quota by year-end. HSBC estimates that half of this quota will be used for investment in Hong Kong, given that “majority of fund managers” prefer to “invest in more familiar companies.”

This is because there is so much mint money eager to be put into stocks in mainland China. According to Chinese data provider Wind, since last August, 76 new onshore equity funds opened shop, raising 150 billion yuan.

All this money has to go somewhere. HSBC expects the southbound quota on the Shanghai Hong Kong Stock Connect to be lifted by 40% to 350 billion yuan and the Shenzhen Hong Kong Connect will kick off soon. See also The Wall Street Journal’s “China and Hong Kong May Relax Stock-Connect Rules” (April 15).

Month-to-date, the Hang Seng China Enterprises Index rose 17.2%, the Hang Seng Index gained 10.9%. The Hong Kong Exchanges & Clearing (388.Hong Kong) jumped 50.1%. The iShares China Large Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) advanced 15.6% and 14.6% respectively.

http://blogs.barrons.com/asiastocks/2015/04/15/chinas-mutual-funds-will-flood-500-billion-yuan-into-hong-kong-hsbc/

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Hong Kong. Photographer PHILIPPE LOPEZ-AFP-Getty Images

Hong Kong stocks rise as more China inflows expected

April 16, 2015

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The Hong Kong exchange flag, with its large X, outside the city's Stock Exchange buildings; rules changes may make it easier for mainland investors to buy Hong Kong shares.  
The Hong Kong exchange flag, with its large X, outside the city’s Stock Exchange buildings; rules changes may make it easier for mainland investors to buy Hong Kong shares. Photo: Jerome Favre/Bloomberg News

(Reuters) – Hong Kong stocks rose on Thursday, as some analysts revised up their index targets in anticipation of fresh money flows from the mainland.

The Hang Seng index rose 0.4 percent, to 27,739.71, while the China Enterprises Index gained 1.7 percent, to 14,720.13 points.

“Investors should continue to build positions in Hong Kong due to its extremely low valuation, relative market isolation and significant underperformance compared with its Chinese comrades,” Hong Hao, chief strategist with BOCOM International, wrote on Thursday.

HSBC said in a report that Chinese mutual funds could raise 500 billion yuan ($80.71 billion) from local investors to invest in Hong Kong.

Foreign investors are also jumping on board Hong Kong’s stock market rally, signalling growing confidence that a bonanza sparked by China inflows is set to continue and could pull funds from other Asian markets.

Investment bank Jefferies lifted its target for the HSCE about 25 percent to 18,500 points. BOCOM’s Hong recently raised its target for the HSCE to 19,000.

Among the most actively traded stocks on Hong Kong’s main board were Ping Shan Tea, up 12.8 percent to HK$0.05 Junyang Solar, up 10.7 percent to HK$0.47 and GOME , down 2.9 percent to HK$1.99.

Total trading volume of companies included in the HSI index was 3.4 billion shares. (Reporting by Samuel Shen and Pete Sweeney; Editing by Richard Borsuk)

Related:

Hong Kong. Photographer PHILIPPE LOPEZ-AFP-Getty Images

China and Hong Kong May Relax Stock-Connect Rules

April 15, 2015

Changes could make it easier for funds to come in and out of the mainland

The Hong Kong exchange flag, with its large X, outside the city's Stock Exchange buildings; rules changes may make it easier for mainland investors to buy Hong Kong shares.  
The Hong Kong exchange flag, with its large X, outside the city’s Stock Exchange buildings; rules changes may make it easier for mainland investors to buy Hong Kong shares. Photo: Jerome Favre/Bloomberg News
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By Lingling Wei in Beijing and Gregor Stuart Hunter in Hong Kong
The Wall Street Journal
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Regulators from China and Hong Kong are considering loosening rules that have blocked small mainland investors from putting their cash in the Hong Kong stock market, marking another step in Beijing’s plan to make it easier for funds to flow in and out of the country.

The potential changes, which would relax the requirement that mainland investors have 500,000 yuan (about $80,000) on account to qualify for the trading program linking the Shanghai and Hong Kong stock markets, could give another jolt to Hong Kong’s surging market. A recent move to allow Chinese mutual funds to buy in Hong Kong through the program sent the market rallying 7.9% last week.

Among other changes being considered for the stock-connect program, according to people with knowledge of the deliberations: significantly expanding or even eliminating quotas capping how much mainland investors can buy in Hong Kong, and vice versa.

One reason for the possible adjustment is the pending launch of a second trading link between the Shenzhen and Hong Kong markets. Regulators say they are trying to draw lessons from the Shanghai-Hong Kong link to make future programs accessible to more investors.

The design of the Shanghai-Hong Kong trading link is “a bit conservative,” said Zhou Xiaochuan, China’s top central banker, at a news conference in March. “It offers some fodder for thought for the next stock link between Shenzhen and Hong Kong,” Mr. Zhou added.

Related Coverage

Such stock links are part of Beijing’s broader effort to make it easier for funds to flow in and out of the country. By gradually relaxing control over the capital account, the Chinese government has its eyes on a lofty goal abroad. China hopes the International Monetary Fund will declare the Chinese yuan an official reserve currency later this year, like the U.S. dollar, the euro and the Japanese yen.

Hong Kong Exchanges and Clearing Ltd. Chief Executive Charles Li indicated last week that the quotas under the stock-link program will be increased. He suggested that investors should expect a substantial rise, adding it would “not simply be 20% or 30%.”

Currently, mainland Chinese investors are allowed to purchase a total of 10.5 billion yuan of Hong Kong stocks on a trading day, while investors in Hong Kong are permitted to buy a daily total of 13 billion yuan worth of mainland Chinese stocks.

“Any changes to the quotas will be orderly,” a Hong Kong stock exchange spokesman said. “The quotas will not be adjusted quickly or without careful consideration by all regulatory authorities”.

Press officials at the top securities watchdogs in China and Hong Kong didn’t respond to requests for comment.

So far, regulators from both mainland China and Hong Kong have waded gingerly into linking their stock markets, underscoring the difficulties in marrying a fast-growing but deeply immature stock exchange and one of the most developed markets. Founded in 1990, the Shanghai Stock Exchange has a market capitalization of $5.2 trillion. By comparison, Hong Kong’s market is a smaller $3.9 trillion. But unlike China’s domestic markets, the laws and market rules for Hong Kong’s offshore finance center are very much in sync with global capital markets.

By deciding whether to expand or abolish the quotas, mainland Chinese officials are trying to strike a balance between getting more foreigners to invest in China’s markets and preventing excess capital to flow out of the country at a time when the economy needs more funds to spur flagging growth.

For Hong Kong regulators, expanding or eliminating the quotas could give a lift to the local exchange and help narrow the valuation disparities between mainland- and Hong Kong-traded shares. It would also lead mainland retail investors—known for their herd mentality—to flock to the Hong Kong market, bringing risks that regulators had sought to fend off.

During the talks leading up to the launch of the Shanghai-Hong Kong link last year, Hong Kong officials insisted that mainland investors must have at least 500,000 yuan on hand to buy shares traded in the former British colony, according to the officials familiar with the discussions.

In a blog post published Thursday, Mr. Li of said the arrival of mainland investors “will bring new challenges and risks to Hong Kong investors. Staying calm and exercising caution in a more active market will be a challenge to each investor in Hong Kong.”

Stocks traded in Hong Kong have been lagging their mainland Chinese counterparts in the past few months, partly due to the 500,000 yuan minimum requirement that has limited mainland investors’ access to Hong Kong. Some firms, such as Beijing-based Junfan Investment Co., have sought to take advantage of the disparity by betting on cheaper Hong Kong shares while simultaneously betting against the more expensive mainland Chinese shares.

“I’ve been buying Hong Kong stocks and at the same time shorting the A-shares traded in Shanghai, profiting from the differences in their prices,” said Peng Junming, Junfan’s head. Mr. Peng said his fund has been up 30% since November. He declined to disclose the size of his fund.

The quota capping how much investors can buy Hong Kong shares was exhausted twice last week, on Wednesday and Thursday, but trading volumes have slipped back since then. Nevertheless, mainland buyers have consistently bought more Hong Kong stocks than at any time before last week when mainland regulators started to allow mutual funds to invest in Hong Kong, according to official data.

Write to Lingling Wei at lingling.wei@wsj.com and Gregor Stuart Hunter at gregor.hunter@wsj.com


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