Posts Tagged ‘stock market’

US debt, spending put Trump, Congress under the gun

August 24, 2017


© AFP/File / by Jean-Louis Doublet | US lawmakers must in the coming weeks settle on a budget for 2018 and authorize the federal government to continue borrowing in order to meet its immediate financial obligations
WASHINGTON (AFP) – Looming deadlines to pass a budget and raise limits on US sovereign debt have left President Donald Trump’s administration and a divided Congress scrambling to ward off fiscal disaster.In the coming weeks, lawmakers must both settle on a budget for 2018 and authorize the federal government to continue borrowing in order to meet its immediate financial obligations — failing which the United States risks defaulting on its debt for the first time in history.

– What is the ‘debt ceiling’? –

The so-called debt ceiling is the legal cap on borrowing by the federal government, which has been raised 78 times since 1960, in most cases without incident.

But it has sometimes sparked fierce battles over spending. Raising the debt ceiling means allowing total US debt to continue growing. Some at the most conservative end of the American political spectrum have crusaded for freezing US debt and enacting strict fiscal austerity.

The United States habitually finances a budget deficit by borrowing from investors.

And if the current $19.9 trillion debt ceiling is not raised, Washington may default on outstanding debts already authorized by Congress — something some economists have warned could lead to a global recession, with interest rates spiking and the stock market crashing.

The federal government hit the debt ceiling in March and since then the Treasury has resorted to “extraordinary measures,” deferring certain investments and payments, to avert a default.

But the Treasury has told lawmakers it will run out of rope by September 29. The non-partisan Congressional Budget Office puts the drop-dead date in mid-October.

– We’ve been here before –

In 2011 and again in 2013, the financial world shuddered as the United States skated dangerously close to a default during battles over raising the debt ceiling.

The ratings agency Standard & Poor’s in 2011 knocked US sovereign debt down a notch from its top grade to AA+, citing the debt ceiling battles.

Under pressure in 2013, the administration of then-president Barack Obama cut a deal with Republican lawmakers who had retaken the legislative majority in 2010.

Trump, who at the time was not in political office, lashed out at Republicans on Twitter.

“I cannot believe the Republicans are extending the debt ceiling — I am a Republican & I am embarrassed,” he said at the time.

Now, he is in the White House, with his own party in control of both chambers of Congress.

– But this time is different –

Talks on the debt ceiling have collided with the perennially fraught matter of federal spending, which has to be addressed before the start of a new fiscal year on October 1 — failing which the government may have to shut down.

Opposition Democrats are refusing to allow funding for a wall along the Mexican border — a key campaign pledge Trump made as part of a hard-right immigration agenda.

Some administration members, including White House Office of Management and Budget Director Mick Mulvaney, wish to tie the debt ceiling to spending cuts.

But the White House and Treasury Secretary Steven Mnuchin are insisting on a “clean” debt ceiling increase, that is, without changes to spending policy as a condition, “as soon as possible.”

by Jean-Louis Doublet

Americans Feel Good About the Economy, Not So Good About Trump

July 17, 2017

By John McCormick

July 17, 2017, 4:00 AM EDT
  • Just 40 percent approve of president’s performance in office
  • Narrow majority expect stock market to be higher by year’s end
Traders pass in front of an American flag displayed outside of the New York Stock Exchange (NYSE) in New York.

 Photographer: Michael Nagle/Bloomberg

Almost six months into Donald Trump’s presidency, Americans are feeling fairly optimistic about their jobs, the strength of the U.S. economy, and their own fortunes. That should be welcome news for the president, except for one thing: The public’s confidence largely appears to be in spite of Trump, not because of him.

The latest Bloomberg National Poll shows 58 percent of Americans believe they’re moving closer to realizing their own career and financial aspirations, tied for the highest recorded in the poll since the question was first asked in February 2013.

A majority expect the U.S. stock market to be higher by the end of this year, while 30 percent anticipate a decline. Yet they don’t necessarily think Trump deserves credit for rising markets and falling unemployment.

Just 40 percent of Americans approve of the job he is doing in the White House, and 55 percent now view him unfavorably, up 12 points since December. Sixty-one percent say the nation is headed down the wrong path, also up 12 points since December.

Trump scored his best numbers on his handling of the economy, but even there the news for him isn’t great. Less than half of Americans — 46 percent — approve of Trump’s performance on the economy; 44 percent disapprove. He gets slightly better marks for job creation, with 47 percent approving.

“If you take the president’s scores out of this poll, you see a nation increasingly happy about the economy,” said pollster J. Ann Selzer, who oversaw the survey. “When Trump’s name is mentioned, the clouds gather.”

In nearly every measure of his performance, the poll indicates that Trump’s tumultuous presidency is not wearing well with the public. A 56 percent majority say they’re more pessimistic about Trump because of his statements and actions since the election. That’s a huge swing since December when 55 percent said his statements and actions made them more optimistic about him.

Read the poll questions and methodology here.

The public has grown more skeptical that Trump will deliver on some of his most ambitious campaign promises. Two-thirds don’t think he’ll succeed in building a wall along the Mexican border during his first term. More than half say he won’t be able to revive the coal industry.

A majority — 54 percent — believe Trump will manage to create trade deals more beneficial to the U.S., but that’s down from 66 percent in December. There’s division on whether he’ll be able to bring a substantial number of jobs back to America, or significantly reform the tax code.

And despite his assurances that he and congressional Republicans will repeal Obamacare and replace it with a “beautiful” new health care bill, 64 percent of Americans say they disapprove of his handling of the issue. That’s especially significant because health care topped unemployment, terrorism and immigration as the issue poll respondents chose as the most important challenge facing the nation right now.

There are at least two areas where Americans say they believe Trump will deliver: Almost two-thirds say he will make significant cuts in government regulation, though it’s not clear whether most think that’s a good or bad thing. Likewise, 53 percent believe he will succeed in deporting millions of immigrants living in the U.S. illegally.

The public is also skeptical about Trump’s abilities as a world leader, with 58 percent saying they disapprove of the way he handles relations with other countries and 46 percent disappointed in his actions on trade agreements.

Americans are more pessimistic about foreign policy than they were in December. Fifty-five percent now say they expect dealings with Germany to get worse during the next four years, up 22 points. The share of poll respondents who anticipate worsening relations with the U.K., Mexico, Cuba and Russia also increased by double digits.

The public is also wary of Trump’s motives in his negotiations with other countries. Just 24 percent said they were “very confident” that Trump puts the nation’s interests ahead of his businesses or family when dealing with foreign leaders.

Americans have plenty of other worries about the world. Majorities believe it’s realistic that terrorists will launch a major attack on U.S. soil (68 percent) and that North Korea will launch a nuclear weapon aimed at the U.S. (55 percent).

Trump has called the expanding investigations into possible connections between his presidential campaign and Russia a “witch hunt.” But the public isn’t necessarily taking his side. Since the president’s decision to oust former FBI Director James Comey, the Federal Bureau of Investigation’s standing has improved. It’s now viewed favorably by 68 percent, up 10 points since December. Comey is viewed positively by 43 percent, while 36 percent see him negatively.

Meanwhile, most Americans don’t share the president’s apparent soft spot for Vladimir Putin: 65 percent view the Russian president negatively — and 53 percent say it’s realistic to think Russian hacking will disrupt future U.S. elections.

There is one notable bright spot for Trump. Though views of the White House as an institution are at the lowest level ever recorded by the poll — with 48 percent now viewing it unfavorably, up 21 points since December — Trump’s voters are still sticking with him. Among those who cast ballots for him, 89 percent still say he’s doing a good job.

The telephone poll of 1,001 American adults has a margin of error of plus or minus 3.1 percentage points, higher among subgroups. It was conducted July 8-12 by Iowa-based Selzer & Co.

Asian markets tank as Trump crisis threatens economic agenda — fear index soared 50 percent

May 18, 2017


© AFP | Asian markets are tracking a sharp sell-off in New York on concerns the crisis engulfing Donald Trump could shatter any chances of implementing his economy-boosting agenda


Asian equities nosedived Thursday while the dollar suffered fresh selling on fears the intensifying crisis surrounding Donald Trump could lead to his impeachment and shatter any chances of his economy-boosting agenda being implemented.

Investors tracked the heaviest losses in New York since Trump was elected, following claims by recently fired FBI boss James Comey that the president pressed him to drop a probe into ex-national security advisor Michael Flynn’s links to Moscow.

That came a day after it was reported Trump had divulged classified information to Russia’s foreign minister, fanning further allegations about his own tied to the country’s leaders.

While the tycoon says he will be exonerated by a newly appointed special prosecutor who will look into the claims, analysts said the uncertainty is rocking markets globally.

There is a growing fear that Trump’s plans for tax cuts, big spending and red-tape slashing — which had fuelled a global equities and dollar rally his November election win — will be thrown off course.

“It?s all about president Trump this morning,” said Greg McKenna, chief market strategist at AxiTrader, said in a note.

“Impeaching Donald Trump was a pipe dream for the Democrats but extremely unlikely to most other observers until a few days ago,” he added. “As it drags on, it hurts sentiment and recently often threatens the administration’s agenda — especially around tax and infrastructure.”

– Fears of collapse –

By the break Tokyo had plunged 1.4 percent, while Hong Kong shed 0.4 percent, Sydney dived 1.3 percent, Seoul was 0.5 percent off and Singapore gave up 0.4 percent. Shanghai lost 0.2 percent, Wellington 0.7 percent and Taipei 0.6 percent.

There were also heavy losses in Manila and Jakarta.

“There is a very high level of uncertainty oozing from the markets but one thing that is crystal clear, investors now believe that at a minimum the rising US political entropy will jeopardise the White House policy agenda, and at the extreme, a Trump impeachment will lead to a flat out market collapse,” said OANDA senior trader Stephen Innes.

The uncertainty fanned a flight to safe assets, sending the yen and gold rallying, while the VIX gauge of volatility — also known as the fear index — soared 50 percent.

The dollar tumbled as dealers began to reconsider the chances of a Federal Reserve interest rate hike next month, which had been widely expected.

In Asian trade the greenback sank below 111 yen for the first time since the end of April, while the euro — itself buoyed by easing uncertainty in the EU and a pick-up in eurozone economic fortunes — continued to levels not seen since Trump’s election win.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 1.4 percent at 19,529.70 (break)

Hong Kong – Hang Seng: DOWN 0.4 percent at 25,188.09

Shanghai – Composite: DOWN 0.2 percent at 3,097.50

Euro/dollar: UP at $1.1166 from $1.1157 at 2100 GMT

Dollar/yen: DOWN at 110.92 yen from 111.96 yen

Pound/dollar: UP at $1.2970 from $1.2967

Oil – West Texas Intermediate: DOWN 19 cents at $48.88 per barrel

Oil – Brent North Sea: DOWN 21 cents at $52.00 per barrel

New York – Dow: DOWN 1.8 percent at 20,606.93 (close)

London – FTSE 100: DOWN 0.3 percent at 7,503.47 (close)

Market’s ‘Fear Gauge’ Nears 1993 Low

May 9, 2017

Low reading indicates investor comfort with current market as jobs and earnings show strength

The VIX, which typically moves opposite from stocks, fell to 9.77 Monday, the lowest close since Dec. 27, 1993. Above, traders earlier this year in the Volatility Index pit at the Chicago Board Options Exchange.

The VIX, which typically moves opposite from stocks, fell to 9.77 Monday, the lowest close since Dec. 27, 1993. Above, traders earlier this year in the Volatility Index pit at the Chicago Board Options Exchange. PHOTO: SCOTT OLSON/GETTY IMAGES


Updated May 8, 2017 8:54 p.m. ET

Investors are as sanguine about the stock market as they have been in almost a quarter of a century, according to one indicator, despite months of global political turmoil, showing comfort in strong corporate earnings and signs that the jobs market is humming.

Sunday’s election in France of centrist candidate Emmanuel Macron as president over far-right rival Marine Le Pen helped remove a major market overhang and gave investors confidence that stocks are unlikely to face a big selloff anytime soon.

The relative calm drove a widely watched measure of anxiety, the CBOE Volatility Index, or VIX, to its lowest level since 1993 on Monday. On Friday, the S&P 500 and Nasdaq Composite both hit new highs and were little changed Monday.

“People are not worried about a market selloff,” said Randy Swan, chief executive officer of Swan Global Investments, which manages $4.2 billion in options-based strategies. “I think the market’s going to go higher over the next several months,” he said.

Still, some investors interpret the VIX’s decline as a contrary indicator of where the market will go. Their view is that the VIX’s slumber—it has been stuck below its long-term average for months—suggests investors have grown too complacent. And some say investors are turning to other financial instruments to protect against a downdraft in stocks.

Former Federal Reserve Gov. Kevin Warsh warned Monday at the Sohn Investment Conference that market risks haven’t vanished. “I would not take comfort; I would take fear,” he said of the VIX’s low level.

The VIX, which typically moves opposite from stocks, fell to 9.77 Monday, the lowest close since Dec. 27, 1993, according to The Wall Street Journal’s Market Data Group. The index at one point Monday dropped as low as 9.67.

The VIX is based on prices of bets on the benchmark S&P 500 index, known as options contracts. It is designed to measure investor expectations for market turbulence one month in the future, and it is used to hedge against bullish wagers on stocks.

Since the financial crisis, during which the VIX reached a record 80.86 in November 2008, it has become one of the most widely watched and used financial tools on Wall Street. More than 40 exchange-traded products track the VIX with more than $3.7 billion in assets under management, according to Goldman Sachs Group Inc., and futures and options on the gauge have exploded in popularity.

The most conventional way to interpret the VIX’s recent moves is that, despite questions about whether President Donald Trump will be able to boost growth, investors are turning more optimistic about the American economy. Recent events have helped: U.S. companies reported their best quarterly profits in five years, and a report this month showed the economy added 211,000 jobs in April, surpassing projections.

Geopolitical concerns have also eased, after last year when Britain’s vote to exit from the European Union and Mr. Trump’s election as U.S. president rattled investors about the rise of populist sentiment. Mr. Macron’s victory in France on Sunday helped to fuel the VIX’s decline Monday, investors said.

Uncertainty remains as to whether the Trump administration can overhaul taxes and deliver on other campaign promises. But, investors say, the calendar is free of major events in the near term that could cause a dramatic market selloff.

Kevin Kelly, chief investment officer of investment-management firm Recon Capital, said in an interview that he received calls, texts and emails last week from people asking him if the VIX’s low signaled the market was due for a selloff. “Everybody is astonished,” Mr. Kelly said.

Yet, he noted, one of investors’ biggest misconceptions is that the VIX can indicate the market’s next direction. “It’s absolutely not the perfect insurance,” Mr. Kelly said.

Some investors are hedging in other ways besides S&P 500 options that drive the VIX. One reason, they say: Betting that the VIX will rise has been a money loser for months.

One large exchange-traded product tracking futures contracts on the VIX has lost 45% this year. Conversely, an exchange-traded product betting that volatility will fall has been a winner, gaining 69% in 2017.

In a sign of how extreme the VIX’s slide has been, its decline this month to a level below 10 prompted the Chicago Board Options Exchange, which manages the VIX, to add additional strike prices to VIX options—the value at which investors can exercise the options. Now, investors can wager with options that the VIX will fall to 9 or 9.5, according to a CBOE spokeswoman.

Monday was yet another example of how the VIX isn’t behaving as investors traditionally expected it to—moving opposite to stocks. Stocks were little changed Monday, yet the VIX had a big move down.

When investors benefit from the stock market going up, they are less concerned about their hedge not paying off, said Russell Rhoads, director of education at CBOE. When the VIX is at very low levels, it’s less likely to move as expected versus stocks, he said.

Historically, the VIX and S&P 500 have moved in opposite directions of each other about 80% of the time, according to CBOE data.

Prolonged periods of low volatility, like the one the market is in, can be the “calm before the storm,” said Gerald Lucas, senior trading strategist at UBS Wealth Management. “But the calm can last a long time,” he added.

Write to Gunjan Banerji at

Appeared in the May. 09, 2017, print edition as ‘Investor Anxiety Drops to New Low.’


Wall Street’s ‘fear gauge’ just finished at its lowest level in 24 years

Published: May 8, 2017 5:00 p.m. ET


A measure of fear on Wall Street ended at its lowest level since 1993 on on Monday, according to FactSet data. The CBOE Volatility Index VIX, +0.82% or VIX, closed at 9.77, off 7.6%, and marking its lowest level since Dec. 27, 1993. The so-called VIX, which is based on options contracts on the S&P 500 index SPX, +0.00% 30 days in the future, has only finished in single digits on 10 occasions. The metric’s historical average is 20 and it has continued to slump as stocks have reached repeated records since President Donald Trump’s Election Day victory in November, which suggests to market participants that investors are becoming too complacent. Although U.S. stocks ended near break-even levels, the Nasdaq Composite Index COMP, +0.03% and the S&P 500 closed at records, while the Dow Jones Industrial Average DJIA, +0.03% also finished flat. France’s election on Sunday, with a victory by centrist Emmanuel Macron, has helped to assuage one of the market’s biggest concerns about the growth of populism in Europe, which threatened to destabilize the European Union and the euro EURUSD, +0.0000% Macron won decisively over rival Marine Le Pen, who had vowed to pull France out of the EU.

Read the full story: Is this the day Wall Street’s ‘fear gauge’ hits rock bottom?

Time (CDT)9:0010:0011:0012:001:002:003:00



  • VIX
    +0.08 +0.82%
  • SPX
    +0.09 +0.00%
  • COMP
    +1.90 +0.03%
  • DJIA
    +5.34 +0.03%

Kraft-Unilever Deal Is Off, but Warren Buffett’s Anomalies Live On

February 21, 2017

The Sage of Omaha has long exploited two market mistakes: the tendency for quality companies and low-risk stocks to outperform

Image may contain: 1 person, eyeglasses

Warren Buffett


Updated Feb. 21, 2017 6:12 a.m. ET

The story of Kraft Heinz Co.’s takeover bid for Anglo-Dutch consumer-goods giant Unilever is short, having lasted from Friday only to Sunday. But behind it lies a tale of market anomalies that have lasted decades, helped make Warren Buffett’s fortune and may—perhaps—have ended in a mini-bubble last year.

Mr. Buffett is renowned as a savvy “value” investor. But much of the billions made by the Sage of Omaha at Berkshire Hathaway was earned by exploiting two market mistakes: the tendency for quality companies and low-risk stocks to outperform.

Image may contain: 1 person

There are many ways of measuring the anomalies, and Kraft Heinz and Unilever fit all of them. They are high-quality companies with predictable earnings and strong cash flow, whose shares have lower-than-average volatility and move less closely in line with the market than the norm — in the jargon, they have lower beta. Kraft is piled high with debt, and Unilever is not, but investors bought into both of their stories last year.

The big question is why such stocks outperform, and so whether they will continue to do so.

The explanation for last year’s performance is pretty clear. Rock-bottom bond yields pushed many investors to buy stocks paying steady dividends instead, and there is a big overlap between measures of low volatility, high quality and a secure dividend.

The result was a stunning performance from those exploiting the anomalies, followed by a snap-back when the fervor for dividends subsided. MSCI’s minimum-volatility index did fabulously well until July, then turned around. The pattern for low-beta stocks was similar, while quality stocks had a hard time keeping up with the rebound in highly indebted oil-related stocks.

Ryan Taliaferro, who runs managed-volatility portfolios at Acadian Asset Management in Boston, says the market was distorted by exchange-traded funds that try to exploit these anomalies. At one point he calculated that the stocks in the minimum-volatility index were significantly more expensive than similar stocks not in the index. “That felt kind of bubbly,” he says.

Last year’s boom-bust pattern is unlikely to be repeated, but there are two competing explanations for the longer-run performance record of safe stocks.

The first is about human behavior. Investors like to get rich quick, like to gamble and have too much faith in their own analysis, so stocks that look like lottery tickets are particularly appealing. High-volatility and more market-sensitive (in the jargon, high-beta) stocks should be overpriced as a result, and so deliver lower returns in the future. So long as get-rich-quick investors remain ignorant of the mistake they are making, the anomaly will continue for everyone else.

The alternative theory is about leverage. Leverage can be added to the safest stocks to bring them up to the same level of risk as the wider market and deliver higher absolute returns. Mr. Buffett found a smart way to gear up using an insurer, but many investors prefer to avoid leverage because of drawbacks such as margin calls. Others are prevented from borrowing by investment mandates. Those who can’t use leverage chase higher returns by buying inherently riskier stocks instead — the same ones that appeal to the get-rich-quick investors. Again, the anomaly remains.

There is something in both explanations, according to a new paper by Cliff Asness, Andrea Frazzini and Lasse Pedersen of fund manager AQR and Niels Gormsen of Copenhagen Business School. Investors don’t like or can’t get loans, and prefer “lottery-ticket” stocks.

This is where we come back to Mr. Buffett and Kraft. Kraft is the embodiment of a strategy to exploit both anomalies: It is a high-quality underlying business but no longer especially low volatility because it has been loaded up with debt. Unilever doesn’t have the debt, so it is still a quality, low-volatility stock.

Mr. Buffett’s extraordinary investment record rests on the same principles, according to an earlier AQR analysis by Mr. Frazzini and colleagues. They found that Mr. Buffett’s preferences for safe and high-quality stocks “almost completely explain the performance of Buffett’s public portfolio,” once leverage was accounted for.

Kraft has walked away from Unilever, but investors should be keeping an eye on the sheer amount of money now dedicated to these anomalies. The more cash chasing them, the less powerful the anomalies will be.

“It’s something to worry about,” says Prof. Pedersen. “I think as awareness of these effects increases that could certainly diminish the returns.”

It’s hard to track the amount of money investors have dedicated to exploiting the anomalies, and impossible to establish how much leverage is used. But valuation offers one proxy, because safer stocks and higher-quality stocks ought to be worth more than risky ones or lower-quality ones.

As investors have tried to exploit the anomaly, valuations have indeed risen. MSCI’s USA Minimum-Volatility Index has a higher price-to-book and higher forward price-to-earnings ratio than the wider market. California-based Research Affiliates calculates that at the end of last year the valuation premium for a low-volatility portfolio above the wider market was about as big as it has ever been. The valuation premium for quality stocks depends on how quality is measured, but on RA’s own metric it is above the historic average.

Kraft’s bid suggests Mr. Buffett and his private-equity partners 3G Capital think there is more to go before the anomalies are played out. For many investors, Mr. Buffett’s view is enough.

Write to James Mackintosh at

Malaysia has “the next 1MDB scandal” — Millions Received by Federal Land Development Authority have not been accounted for — “Lost money” likely to exceed 1MDB’s $1 to 10 Billion

February 13, 2017

FELDA Super-Scandal Emerges As The New 1MDB Times Ten..

Malaysia has “the next 1MDB scandal” — Millions Received by Federal Land Development Authority have not been accounted for — “Lost money” likely to exceed 1MDB’s $1 to 10 Billion “missing”

Malaysia's Prime Minister Najib Razak is greeted by farmers of Federal Land Development Authority (FELDA) at Felda Jengka 8, near town of Jerantut, 170 km (106 miles) east of Kuala Lumpur May 8, 2012. REUTERS/Bazuki Muhammad

The new Chairman of FELDA (the Federal Land Development Authority), Shahrir Abdul Samad, was one of the people exposed for having received a big fat million ringgit cheque from Najib’s slush fund accounts, for which he has yet to give an explanation.

Najib has moved quickly therefore to bring this UMNO backbencher Chairman to heel when he appeared to stray this weekend, after he’d appointed the veteran politician to head the plantation fund last month (instead of an objective business leader, which was plainly needed).

To begin with, Samad had clearly decided that he did not want to end up the figurehead of the next 1MDB scandal (times ten on the Richter Scale). Therefore, unlike Arul Kanda, he decided to cry foul rather than start covering up from day one.

On Saturday he went public with his concerns that RM4.3 billion of FELDA famers’ money cannot be properly accounted for.

It didn’t last long. One assumes it took a far larger cheque to get Samad to change his tune, but by Sunday evening the party stalwart had denied his earlier reported statement, rattling out a list of unbelievably expensive global investments to apparently explain where all the money went.

These inflated purchases consisted mostly of hotels, which have nothing to do with FELDA’s core plantation business and many of which the fund is now desperately trying to off-load, doubtless at a loss, in order to finance borrowing and debts… and looming election costs:

Shahrir was commenting on reports that ..RM6 billion received by Felda after the FGVH listing has not been accounted for.

He said RM1.438 billion was invested in property, namely in Bukit Katil, Malacca for RM304 million, Grand Borneo Hotel in Sabah (RM86 million), Grand Plaza Service Apartment in London (RM500 million), Institut Penilaian Negara (INSPEN) building (RM225 million) and Iris Corporation Berhad shares (RM110 million).

Shahrir said the RM1.438 billion invested in the service sector, especially property involving hotels, was to ensure long-term investments that can be beneficial in the future.

He said Felda had also purchased Felda Technoplant Sdn Bhd worth RM38 million while total accumulated loses for Felda amounted to RM108 million, involving the Transnovasi Project…

Shahrir, who took over the post from Isa Samad, said Felda had also decided to sell a hotel bought by the agency in London at a cost of RM548 million in 2012.

So, why did FELDA spend hundreds of millions on these hotels, when much of its plantation stock was already in need of regeneration and the business needed to upgrade and improve its productivity on behalf of the long-term interest of Malaysia and its farmers?

Sharir must know that whilst 1MDB has moved the nation to righteous fury, that anger will measure nothing compared to the outrage and disgust of the hundreds of thousands of FELDA families, who have started to realise how all their savings and their patrimony have  disappeared with the sinking fund.

FELDA Super Scandal

Back in 2012 the FELDA Global Ventures sell off was another of the new Prime Minister Najib Razak’s ‘economic master-strokes’.  Reuters reported that it was the 2nd biggest ever IPO after the Facebook stockmarket launch – it put Malaysia on the global map.

However, it also disposed of a hugely valuable industry that had been originally founded and nurtured in the interests of the working families, whose lands and livelihoods were tied up in the plantation lands.

Reuters recorded how at that time many of those farmers were therefore rightly worried and reluctant. They knew they could never buy back their heritage, which had so grown in value in recent years.  However, Najib, also Finance Minister, knew how to tempt their worries all away:

Felda’s listing plans were initially met with resistance from the farmers who partly owned the firm and feared the loss of control of an asset they had invested in for generations.

The government, a key shareholder in the firm via state-linked funds, sweetened the deal with windfall payments totaling nearly $5,000 each generated from the a fifth of the IPO proceeds.

To keep the farmers happy, government-linked funds and the domestic pension fund, which accounted for part of the institutional tranche, made a rush for the stock during the book-building process.

“This Felda IPO is an embarrassment,” said an official with a Malaysian bank-backed fund management firm. “About 23 percent of the book was allocated to ‘friends and family’, all at the expense of legitimate investors with potential synergies.” [Reuters 2012]

So, for around RM15,000 a family (a fifth of the money raised) Najib bought the resisters round and also directed a mass of government linked companies to join the rush to build up the stock market share price to astonishing levels.

At their height at the time of the launch shares in the new FELDA Global Ventures traded at up to RM5.46 (ringgit), whereas now after years of plunder and mismanagement they are trading at a miserable RM1.9.

It represents a horrifying loss for investors. Those include government-controlled funds entrusted with the money of ordinary savers like Tabung Haji, which was encouraged for political reasons bump up the original share price. Opposition MP Rafizi Ramli has pointed out that the pilgrimage fund has lost a billion ringgit owing to the plummeting share value.

That represents a billion ringgit of savers’ pilgrimage money lost thanks to politically driven bad decisions to pay far too much money for those shares.

And the situation went from bad to worse. Under Najib’s original toady Chairman, Isa Samad, the money that had been made from that original IPO has by all accounts been disappearing. As one insider has told Sarawak Report:

“an excess of RM2 Billion is being furiously padded on projects being approved to be siphoned off my PM & his wife”

Such projects would appear to have included the ludicrous decision to buy a 37% stake in the Indonesian plantation business of Najib’s personal friend Peter Sondakh for $700 million, which was at least double its market valuation, last year.

Following that scandal the Employee Provident Fund, which has also clearly lost huge sums of ordinary Malaysians’ pension money owing to FELDA Global Ventures, pulled out of it investment in the fund. Yet, Najib has persisted in trying to force FELDA itself to invest in Peter’s projects. The reason seems blatantly obvious.

Where did the money GO?!

So, with all those developments the question facing Shahrir Abdul Samad, as the new incoming Chairman, was what has happened to the original $3 billion (RM15 bn) windfall made by FELDA back at the time of that original IPO in 2012 (just before the election)?

Just four years later, after all, the fund is in difficulty and having to borrow money!

One fifth of the money went on that up-front RM15,000 bribe to the farming families, in order to persuade them to support the public offering, according to coverage at the time.

This is what Najib Razak told FELDA farmers as the 1MDB scandal broke in 2015:

‪”We must.. not blindly believe what is in social media. What is true is true, what is false is false,” he told some 500 Felda settlers.

‪He also stressed since he had Felda under his watch, he had spearheaded many “changes” that were “unseen before”, including ensuring better living conditions for Felda settlers.

‪Najib labelled the interest free loan given to Felda settlers to upgrade their homes as the “best loan in the world”.

‪”Which other country has a loan this good? I look at the settlers’ homes and they are quite well-built,” he said.

‪Under the scheme, each settler was allowed a loan to a maximum of RM40,000 to upgrade their homes, without interest.

Now those farmers are starting to realise how they were short-changed, just as the Sarawak Native Landowners were short-changed after they were forced to place their money in the now empty ASSAR fund.

FELDA’s farmers will have to settle on Najib getting a good price for the none too glamerous Kensington Hotel, because he is without doubt planning on using it for their next election bribe.

Grand Plaza Kensington - bought for £100 million (RM500m)

US economy continues to expand, optimism about 2017 growth — Wages increased modestly, Prices likely to rise — Fastest rate of growth since 2009

January 18, 2017


“Firms across the country and industries were said to be optimistic about growth in 2017,” the Fed’s Beige Book survey of the economy said. Credit AFP and Getty Images

WASHINGTON (AFP) – The US economy continues to expand and is now seeing tight labor markets and rising price pressures, as businesses nationwide have an upbeat outlook for 2017, the Federal Reserve said Wednesday.”Firms across the country and industries were said to be optimistic about growth in 2017,” the Fed’s Beige Book survey of the economy said.

by Heather SCOTT
From Market Watch

Fed’s Beige Book: Prices pressures ‘intensified’ at end of last year

Published: Jan 18, 2017 2:12 p.m. ET

Wages also increased modestly, the central bank said



Inflation is heating up in the United States, a report released Wednesday showed.

The Federal Reserve’s so-called Beige Book, a collection of anecdotes about the economy gathered before the central bank makes interest-rate decisions, said “prices pressures intensified somewhat” in the last few weeks of 2016.

Eight of the 12 Fed districts saw modest prices increases and the remainder saw smaller gains, the report said. Only Atlanta reported flat prices.

Increases in input goods were more widespread than increases in final goods prices. Costs increases were reported for coal, natural gas, and selected building and manufacturing materials.

Retailers still struggled to raise prices, and farm products “stayed flat at very low levels,” the report said.

That fits with other data. A report released earlier Tuesday showed consumer prices growing 2.1% in the 12 months ending December, the fastest pace in five years.

Most districts said that wage pressures had increased, pushed higher in some instances by increases in the states’ minimum wages.

The majority of districts reported that labor markets were “tight” and many thought this trend would continue in 2017 with wage pressures likely to rise.

Again, that fits with other data.

The government reported that wage growth rose at a 2.9% annual pace in December, the fastest rate of growth since 2009.

The Fed has been trying to get inflation back to its 2% target. Many on the central bank think it could happen over the next two years.

Overall, the report said the economy is continuing to grow at steady, yet unspectacular, rate.

The report said the economy in most of the country grew at a modest to moderate rate. Manufacturing reported increased sales in most districts, a turnaround to the weakness seen at the start of last year.

On the other hand, several districts reported that retail sales over the holiday were “disappointing.”

The report was based on information collected on or before Jan. 9.

There were a few mentions of the rise in the dollar DXY, +0.67%   since the election, as some industries were worried it might dampen sales. The Wall Street Journal’s dollar index BUXX, +0.72%  , even with losses this year, has climbed 7% from its May lows.

Uncertainty over the future of Obamacare was seen as a headwind to the health care industry in San Francisco and Boston.

Assorted nuggets from the report:

  • Housing markets have continued to weaken at the high end in New York. And New York City’s rental market has weakened noticeably.
  • Freight volume is flat compared to the same time last year in Chicago and was seen as sluggish.
  • Container traffic at one port in Richmond expanded at double-digits every month in the fourth quarter in part because of calls from larger, “post Panamax vessels.”
  • Tourism in Florida was down slightly since November.
  • Manufacturers in Cleveland felt a “post-election euphoria.”

FTSE 100 hits successive record highs – but can it last?

January 6, 2017


Traders work on the floor of the New York Stock Exchange

Traders rejoiced as the FTSE 100 hit a record high, but will the glory be short-lived?CREDIT: SPENCER PLATT/GETTY IMAGES

By Laura Suter
he Telegraph

Britain’s blue-chip index may have started the year by reaching a succession of highs – six record closes mark its longest winning streak in two decades – but how solid are those gains?

In 2016, the FTSE 100 ended the first week in January on 5,912 points, in the first week of this year it scaled to 7,208 points – a rise of 22pc.

While many investors will see the record levels as reason to rejoice, the underlying causes are not so cheering.

 Image may contain: night and outdoor

The fall in sterling is particularly significant: around 70pc of FTSE 100 companies’ earnings are made overseas and any fall in the pound makes them more valuable in sterling terms.

The pound has fallen against the currencies of UKtrading partnersSource: BloombergBloomberg British pound indexJan ’16Apr ’16Jul ’16Oct ’16Jan ‘

During 2016 the FTSE 100 rose by more than 19pc. However, in US dollar terms – stripping out the positive impact of sterling’s fall – the index actually fell, by 0.2pc.

The rise of the index in 2016 also hides enormous divergence. Looking at the index sector by sector shows that there were some large risers and some steady fallers.

Oil and gas producers rose by 61pc last year, while the FTSE 350 mining index rose by 100pc. Basic materials, which includes the mining and refining of metals, chemical producers and forestry products, rose by 90pc, while the construction and materials industry rose by 49pc.

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On the other hand, retailers fell by nearly 14pc, while the telecoms sector was down 12pc and food producers lost 9pc. Real estate was hit the hardest, falling by 32pc in the year.

Jason Hollands from Tilney Bestinvest, the fund shop, said: “Currency moves rescued markets for UK investors last year. If you were cautious a year ago, with concerns about the uncertain geopolitical outlook, then this year has similar warnings.”

He pointed to a “marathon” of European elections and the potential unpredictability of Donald Trump’s presidency.

Chris Wyllie, chief investment officer at Connor Broadley, the wealth management firm, said he did not have concerns about the valuations of British companies but advised investors to be discerning and to “buy the dips”.

“There are going to be some bloodbath sectors for medium-sized firms, retail being one. More businesses will be going to the wall,” he said.

Mr Wyllie pointed to the example of Next, which this week issued a profit warning after slower Christmas sales, and said: “If Next is feeling it, what are the less good businesses out there going to be doing?”

However, investors also need to separate the fortunes of the FTSE 100 index from their feelings about the domestic economy.

“The UK stock market is not that reflective of the UK economy. Investors’ view on the UK economy is not a particularly positive one,” said Mike Bell, global market strategist at JP Morgan Asset Management.

There are some big question marks hanging over Britain in 2017, said Tom Stevenson from Fidelity, the asset manager. The first is domestic earnings.

“Economic growth in the UK is probably going to slow down significantly because inflation is likely to rise and that means real consumer purchasing power is going to diminish,” he said.

It wouldn’t surprise me to see inflation of 3-4pc later this year, which will put a squeeze on consumer spendingBen Yearsley, Wealth Club

Inflation will hit the price of any goods imported, hurting UK consumers’ pockets, said Ben Yearsley, investment director at Wealth Club, an investment service.

“UK inflation is still relatively benign with retail prices index running at 2.2pc. As we import many goods into the UK, the depreciation in sterling will start pushing the costs of goods we import up, thus forcing inflation up.

“It wouldn’t surprise me to see inflation of 3-4pc later this year, which will put a squeeze on consumer spending. Normally the Bank of England would raise rates to combat inflation, but this might not happen this time,” he said.

The other big risk to British shares is Brexit and the associated uncertainty. Mr Bell said the fall in sterling had priced in a “hard Brexit” that might not materialise.

“If so, sterling will rally and that could reverse some of the gains that we have seen as a result of its fall,” he said.

Earnings, Not Donald Trump, Are Stocks’ Best Friend in 2017

January 3, 2017

Continued rebound in corporate profits should prop up share prices regardless of Washington policies

A trader on the floor of the New York Stock Exchange Friday was looking forward to the new year.
A trader on the floor of the New York Stock Exchange Friday was looking forward to the new year. PHOTO: MICHAEL NAGLE/BLOOMBERG

Jan. 3, 2017 5:30 a.m. ET

Here’s one simple thing set to help sustain stocks’ march in 2017: corporate earnings.

While Donald Trump’s election supercharged investors’ hopes for business-friendly policies, corporate earnings quietly climbed out of a five-quarter slump.

It’s a long-awaited improvement. Stock performance was tepid in 2015 and early 2016, with many investors and analysts citing the lack of earnings growth as a main culprit. The S&P 500 gained 1.9% from the end of 2014 through the first half of 2016.

The 6.7% rally since then, much of it since Election Day, has largely been attributed to the potential for tax cuts, looser regulation and fiscal spending under the president-elect. But the rise has also coincided with a fundamental improvement: U.S. companies’ return to earnings growth.

“It’s earnings growth that drives stocks over the long term,” said Tom Cassidy, chief investment officer at Univest Wealth Management Division. While “we won’t know if any of these policies will actually be implemented until later next year,” a continued rebound in earnings should nevertheless prop up stocks for additional gains, Mr. Cassidy said.

Earnings for companies in the S&P 500 grew 3.1% in the third quarter from a year earlier, according to FactSet, entering positive territory for the first time since the first quarter of 2015, when they grew 0.5%. Analysts polled by FactSet expect the rebound to continue, and are estimating a 3.2% growth rate in the fourth quarter of 2016.

An end to the longest earnings slump since the financial crisis also comes against a backdrop of improving economic data. U.S. gross domestic product, a broad measure of the goods and services produced across the economy, posted its strongest quarterly pace of growth in two years in the third quarter, according to data released by the Commerce Department in December.

The S&P 500 climbed 9.5% in 2016, its biggest gain since 2014.

While it’s only one quarter of earnings data, the return to growth is giving investors more reason to believe the stock market will keep climbing in 2017.

The improved outlook for financial companies also bodes well. The S&P 500 financials sector was up 20% in 2016 and was responsible for nearly half of the total earnings growth for the S&P 500 in the third quarter, according to FactSet data.

Financials posted 8% year-over-year earnings growth, according to FactSet. J.P. Morgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley all beat analysts’ estimates on an earnings-per-share basis.

Several lenders, including J.P. Morgan, the largest U.S. bank by assets, reported a rebound in their trading businesses. While low interest rates have for years cut into banks’ net interest margins–a key measure of lending profitability–events like the U.K.’s surprise vote to leave the European Union or uncertainty around the Fed’s next steps on interest rates have helped boost trading revenues, some of the banks said.

Many of the banks expect trading gains to continue. Executives at Citigroup, Bank of America and J.P. Morgan said at a banking conference in early December that they expect key fourth-quarter trading metrics to grow by double-digit percentages from the year-earlier period.

But risks remain.

Industrials—which have helped lead the recent stock-market rally with a 7% gain in the S&P 500 since Election Day—are expected to report an earnings decline of more than 8% in the fourth quarter from the year-earlier period, according to analysts polled by FactSet.

Caterpillar is projected to be among the biggest drags on the sector’s earnings in the fourth quarter. Shares of the maker of construction and mining equipment—whose results are closely watched as a barometer for global manufacturing activity—gained 36% in 2016. But for the fourth quarter, the company is expected to report earnings of 66 cents a share, down from $1.02 a share at the start of the quarter, according to FactSet estimates. The company said in October that it could report a loss for the year, and it predicted another tough year for 2017.

A strengthening U.S. dollar could also hamper the earnings of multinational companies. While a stronger dollar increases U.S. buyers’ purchasing power abroad, it also makes U.S. exports more expensive to foreign buyers, putting pressure on the bottom lines of companies that receive a significant chunk of their revenue from abroad. Roughly 31% of S&P 500 revenues come from outside the U.S., according to FactSet estimates.

The dollar has rallied since Election Day on prospects of a higher-growth, higher-rate environment, which makes it more attractive to yield-seeking investors. The WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, gained about 3% in 2016.

The prolonged S&P 500 earnings slump has also helped make stocks more expensive than their historical averages. The S&P 500 was trading at around 21 times its past 12 months of earnings last week, according to FactSet. Its 10-year price/earnings average is 16.

“People are very inclined to ignore P/E values going up,” said Bret Chesney, senior portfolio manager at Alpine Global, who added that he thinks stocks are too expensive relative to how companies have performed over the past several quarters. “I wouldn’t be too gung-ho to invest at these levels.”

Still, many analysts believe there is reason to be optimistic about the coming year.

Corporate earnings are projected to grow by double digits through 2017. Analysts polled by FactSet expect earnings to grow 11% in the first quarter, 11% in the second quarter, 9.1% in the third quarter and 14% in the fourth.

“There’s some meat to the rally,” said Karyn Cavanaugh, senior market strategist at Voya investment Management. “I think 2017 is shaping up to be a good year.”

Write to Akane Otani at

Xi’s Power Play Foreshadows Historic Transformation of How China Is Ruled

December 27, 2016

Party insiders say president wants to remain in office after his second term, breaking succession conventions

Xi Jinping believes in top-down decision-making by a small circle of advisers, who now govern through a dozen or so committees he heads.
Xi Jinping believes in top-down decision-making by a small circle of advisers, who now govern through a dozen or so committees he heads. PHOTO: DAN KITWOOD/AFP/GETTY IMAGES


Dec. 26, 2016 2:01 p.m. ET

BEIJING—China’s Communist Party elite was craving a firm hand on the tiller when it chose Xi Jinping for the nation’s top job in 2012. Over the previous decade, President Hu Jintao’s power-sharing approach had led to policy drift, factional strife and corruption.

The party’s power brokers got what they wanted—and then some.

Four years on, Mr. Xi has taken personal charge of the economy, the armed forces and most other levers of power, overturning a collective-leadership system introduced to protect against one-man rule after the death of Mao Zedong in 1976.

Shattering old taboos, Mr. Xi has targeted party elders and their kin in an antigraft crusade, demanded fealty from all 89 million party members, and honed a paternalistic public image as Xi Dada, or Big Papa Xi.

 Image may contain: 1 person, closeup
After decades of collective leadership among top Communist Party officials, could Xi Jinping be shifting to a more rigidly autocratic model? Photo: Xinhua News Agency

Now, as he nears the end of his first five-year term, many party insiders say Mr. Xi is trying to block promotion of a potential successor next year, suggesting he wants to remain in office after his second term expires in 2022, when he would be 69 years old.

Mr. Xi, who is president, party chief and military commander, “wants to keep going” after 2022 and to explore a leadership structure “just like the Putin model,” says one party official who meets regularly with top leaders. Several others with access to party leaders and their relatives say similar things. The government’s main press office declined to comment for this article, and Mr. Xi couldn’t be reached for comment.

Mr. Xi’s efforts to secure greater authority may help ensure political stability in the short run, as an era-defining economic boom starts to falter. But they risk upending conventions developed since Mao’s death to allow flexibility in government and ensure a regular and orderly transition of power.

Concern is rising among China’s elite that the nation is shifting toward a rigid form of autocracy ill-suited to managing a complex economy. China’s array of challenges includes weaning the economy off debt-fueled stimulus spending, breaking up state monopolies and cleaning up the environment.

“His dilemma is that he can’t get things done without power,” says Huang Jing, an expert on Chinese politics at the National University of Singapore. “He feels the need to centralize, but then he risks undermining these institutions designed to prevent a very powerful leader becoming a dictator.”

Mr. Xi’s supporters say he still faces resistance within the party, and needs to modernize leadership structures to confront the slowing economy and a hostile West.

At a meeting of 348 party leaders in October that granted Mr. Xi another title—“core” leader—he railed against indiscipline and warned of senior officials who “lusted for power, feigned compliance and formed factions and gangs.”

Since then, many party members have signed written pledges of “absolute loyalty.” In a speech in October, the party chief of Henan province, Xie Fuzhan, hailed Mr. Xi as a “great leader”—words usually reserved for Mao.

Hours before Donald Trump’s election victory, China officially launched its own convoluted process for selecting a new national leadership team, to be unveiled at a twice-a-decade party congress next fall. Up to five of the seven members of the Politburo Standing Committee, China’s top leadership body, are due to retire.

Only Mr. Xi and Premier Li Keqiang would remain if the party observes the precedent, established in 2002, that leaders over age 67 step down.

Replacements usually are chosen by outgoing and retired Standing Committee members. The custom since 2007 has been that two of those selected are young enough to succeed the party chief when he completes his second term.

Chinese President Xi Jinping, left, and Premier Li Keqiang arrived for the opening session of the National People's Congress in March.
Chinese President Xi Jinping, left, and Premier Li Keqiang arrived for the opening session of the National People’s Congress in March.PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGE

Shortly before China began formal preparations for the congress, senior party official Deng Maosheng cast those conventions into doubt by saying at a news conference that the idea of an age limit for top leaders was a “popular saying” that “isn’t trustworthy.”

Some party insiders say they believe Mr. Xi is trying to pack the new Standing Committee with allies and to hinder others from elevating favorites. They say he wants his anticorruption chief, Wang Qishan, to keep his seat despite already being 68, and possibly to take over as premier. Messrs. Wang and Li couldn’t be reached for comment.

There is even talk within the party of shrinking, downgrading or scrapping the Standing Committee and adopting a more presidential system like Russia’s, in which Vladimir Putin, now in his third term, has broad executive authority and could serve until 2024.

Succession talk

Recent internal discussions suggest that “no successor will be appointed” to the Standing Committee next year, says the party official who meets regularly with top leaders. Mr. Xi is “very forceful about preventing the elders from interfering too much,” he says.

Some of those ideas may be bargaining positions to bolster Mr. Xi’s hand in the negotiations that precede the congress.

Some believe that his rivals may yet thwart his ambitions, or that he could change direction in his second term. With no overt signs of resistance, however, there is a sense among many who meet or monitor China’s leaders that it could be the start of a new era of hard authoritarianism.

“China’s strongest leaders needed at least 20 years to achieve results. Xi Jinping will be the same,” says one retired senior official who has regular access to party leaders. “Mao built the nation. Deng Xiaoping made it rich. We’re now in the Xi era, which will make it strong.”

Mr. Xi’s goal appears to be to remodel the party as a disciplined organization, loyal to him personally, and to reassert its role as the dominant force in society and the economy. He believes in top-down decision-making by a small circle of advisers, who now govern through a dozen or so committees Mr. Xi heads, party insiders say.

Anticorruption chief Wang Qishan, a powerful ally of President Xi, sits on the seven-member Politburo Standing Committee, China’s top leadership body.
Anticorruption chief Wang Qishan, a powerful ally of President Xi, sits on the seven-member Politburo Standing Committee, China’s top leadership body. PHOTO: JASON LEE/REUTERS

His reputation within the party is as a micromanager who frequently makes notes on the many documents crossing his desk. One of his committees, the Central Leading Group for Comprehensively Deepening Reforms, has issued 96 edicts this year, up from 65 last year and 37 the year before.

Mr. Xi has won popular support by fighting corruption and mobilizing the military to enforce territorial claims and protect Chinese interests world-wide, while boosting his global stature with a “One Belt One Road” plan for infrastructure links between East and West.

He is using big data to establish new means of control, including a “social credit” system to monitor and rate citizens’ financial and other activities by 2020.

In other areas, recentralizing power hasn’t helped. After pledging to allow the market a “decisive role” in 2013, his government mishandled a stock-market crash and currency devaluation last year, and this year he began advocating a stronger role for the state in the economy, directly contradicting signals from Premier Li.

Efforts to curb state spending and high debt levels appear to many economists to have been trumped by Mr. Xi’s goal of doubling gross domestic product between 2010 and 2020.

With property prices and capital outflows ballooning, the prospect of bolder overhauls dimmed in November with the dismissal of reformist finance minister Lou Jiwei .

Mr. Xi’s emphasis on obedience and austerity has prompted many officials to leave government while others simply pass along orders or avoid taking initiative, according to many who work in or deal with the government.

Bureaucrats are inundated with official documents and study sessions related to Mr. Xi’s many campaigns, including a recent one directing them to read, deliver presentations and do written tests on a book of his speeches.

A judge in a large Chinese city says he resigned this year because of rules that required him to hand in his passport, report on his family life and attend political meetings at which superiors would read out official documents, already published in state media, often for two hours at a time.

Stifling debate

A campaign against dissent and Western influence in media, arts, education and law is stifling creative thought and open debate, according to some people working in those areas.

Liberal economist Mao Yushi, 88, who advocates scrapping the state sector, says he recently was warned by a party official to resign from the independent Unirule Institute of Economics that he co-founded in 1993. He says the institute’s Chinese donors fear official retribution and its foreign sponsors face a new law restricting foreign funding.

He says he is still optimistic for China, but only “after Xi Jinping.”

China has vacillated between one-man and collective rule for a century. Even Mao Zedong initially shared control with other revolutionaries after the 1949 Communist takeover, before enforcing his dominance and plunging China into two decades of chaos that killed tens of millions. Deng Xiaoping, his successor who launched China’s economic liberalization, developed rules for sharing and ceding power.

“There is a limit to anyone’s knowledge, experience and energy,” Mr. Deng said in a 1980 speech often cited by critics of Mr. Xi, who now has at least 12 titles. Mr. Deng tried to remove the party from day-to-day government, delegating power to ministries and local authorities.

Hu’s Example

Hu Jintao, who ruled beginning in 2002, was China’s first leader to give up all of his posts—party head, president and military chief—after 10 years in office.

By 2012, the party was in crisis. Corruption and party infighting had been exposed by a scandal involving Bo Xilai, a Politburo member ultimately jailed for abusing power after his wife was convicted of murdering a British businessman.

An economic growth model driven by exports and infrastructure investment was flagging. Labor costs, social unrest, local-government debt and environmental problems were rising, undermining the party’s main claim to legitimacy—that it delivered political stability and ever increasing prosperity.

Some in the party felt the diffusion of power had gone too far.

Mr. Xi, the son of a revolutionary hero purged by Mao but later rehabilitated, had no cohesive power base. His appointment was largely engineered by former President Jiang Zemin. Premier Li was known to have been Mr. Hu’s first choice as his successor.

Still, Mr. Xi had a powerful ally in Mr. Wang, a friend for several decades who was now anticorruption chief. Together, they used the Bo scandal as justification to launch an anticorruption campaign that targeted potential threats to Mr. Xi’s authority as well as a real problem for the party.

President Hu’s chief of staff, one of his most senior generals and his domestic security chief, Zhou Yongkang, as well as many lower-level officials associated with them were convicted of corruption. That curbed the influence of networks centered around Mr. Xi’s two predecessors.

He antagonized many people along the way. “So many groups have been targeted now, it could be dangerous for him to retire” in 2022, says Zhang Lifan, a Beijing-based political commentator. “That’s also why he wants Wang Qishan to stay.”

Fear of corruption investigators prevents overt challenges, but passive resistance within the party is widespread, and as Mr. Xi accumulates power he assumes more responsibility for failure, party insiders say. He has limited numbers of people he can truly trust, these people say. His power is undisputed, yet fragile, they say.

The anticorruption campaign has morphed into a drive to enforce discipline, increasingly defined as implementing Mr. Xi’s decisions.

Members of the Central Committee vote during their sixth plenum in Beijing — but they all know Mr. Xi holds all the realk  power and demands obedience. Photo: Xinhua

At a meeting in October, the Central Committee approved Mr. Xi’s status as “core” leader—a title never conferred on Mr. Hu. The takeaway for party members who discussed the development at subsequent meetings was that Mr. Xi had the final say on all issues, including next year’s reshuffle.

Li Zhanshu, head of the party’s powerful General Office, urged officials in a November newspaper editorial to rally around Mr. Xi as “the most prestigious, the most influential and the most experienced” party leader.

Some party members expect Mr. Li, one of Mr. Xi’s closest allies, to take the anticorruption job on the Standing Committee next year, with Mr. Wang becoming premier instead of retiring. That would tighten Mr. Xi’s hold on power until 2022 and set a precedent for him staying on after that.

There is a constitutional two-term limit on the presidency. There also are party rules saying no leading official can stay in the same post longer than 10 years, or at the same level of the party for more than 15.

Some party insiders say the latter rules don’t apply to the Standing Committee. Others believe Mr. Xi could change the rules, or switch roles, as Mr. Putin did in 2008.

Write to Jeremy Page at and Lingling Wei at


 (Even “peacekeepers” can get killed)