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China’s Emerging Markets

October 21st, 2017

Emerging market economies – most notably China and India – are expanding faster than those in developed nations.  With this growth, emerging market companies are able to offer potentially attractive returns to long-term stock investors, while bond investors can reap the benefits of generally higher interest rates than in developed markets.

According Tao Zhang, IMF Deputy Managing Director it is crucial for emerging markets at this point to remain “vigilant” to potential risks.  China’s economy is currently encountering substantial changes during its transition to a consumption-led economy which moves away from dependence on cheap good exports. As such, it is vital leaders are aware of the “rapid credit expansion.”

Still, at the latest World Economic Outlook, the forecast for China’s economic growth (this and next year) was increased to 6.8 percent (2017) and 6.5 percent (2018); a 0.1 percentage higher than July forecasts.  The region’s economic growth is mainly due to progress within economic reforms, in particular, supply-side structural measures along with the capacity of the government to maintain a stable macroeconomic policy.

It should also be noted that there is a targeted urban area population increase in 2020 of 60%, translating into a move of 41 million individuals from rural areas to urban centers in China.  What this means is that there will likely be significant investment opportunities given that urban residents have different consumption patterns and higher wages.

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China’s ODI

June 18th, 2016

ChinaThere was a 32 percent increase in investment in the Belt and Road project in Beijing from Chinese firms, in the first four months of 2016.  According to  Xinhua a staggering $4.9 billion was invested during this time period. The goal of this project is the establishment of an “economic corridor,” linking China and Central Asia with Europe in a “21st century reprise of the ancient caravan routes.” Furthermore, the Ministry of Commerce reported that between January and April 2016, there was an escalation of 71.8 percent in ODI, reaching 391.5 billion yuan (about 60.1 billion US dollars). Likewise in the service sector there was an increase of 73.2% to $43.8billion.

China has been intensifying its presence in the worldwide economy in recent years.  When analyzing this trend, it is paramount to look at the country’ ODI since that can be what is needed to bolster growth.  To date it has comprised investment in M&As and start-ups and growth is anticipated from around $744 billion to around $2 trillion by 2020 (currently the leader in ODI in the world is America with $4.92 trillion). Due to European economic devastation, this ODI was met with an incredible reception throughout Europe, most notably UK, France and Germany which has reaped the most benefits from Chinese funding in the last few years.

It should be noted though that FDI has also played a significant role in China’s success, turning the region into “one of the world’s biggest cross-border investors.”  According to figures from the Commerce Industry, there was an increase of 4.8 percent in the first quarter from 2015 year-on-year to 286.78 billion yuan ($45.3 billion).

So together with its FDI, China is fast becoming a leader in the global economy.  As Bill Gates said recently in an interview with Xinhua “China is going to be contributing more and more to the world’s innovation.”

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Boosting Indonesia’s Economy

September 9th, 2015

hong kongActions by officials in Indonesia are being put in place to help ensure a “massive deregulation” in the country in the hopes of attracting investments. Due to a deceleration in domestic consumption, the economy has been waning. China’s super cheap prices hasn’t helped the country much either.

Some of the actions include: a reshuffle of the governmental economic group, new stimulus package, infrastructure projects (most notably the coal-fired power plant). Regulations are being reviewed to ensure that those which can be eliminated, will.

To get back on the successful bandwagon, Indonesia requires 3,518 trillion rupiah (HK$1.9 trillion) of investment to achieve its economic growth target of 7 percent. This can come from both local and FDIs. If this isn’t achieved, growth will not exceed more than 5 percent, the lowest it has been in the country since 2009.

In more positive news however, Indonesia is the battleground between China and Japan as to which country will get the rights to build its first high speed railway. That will definitely help its economic environment. The competitive spirit is good for everyone. Especially since Indonesia is long overdue for a multi-million dollar overhaul of its antiquated infrastructure.

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QDII2: Boosting the Yuan

May 9th, 2015

YuanIn an effort to globalize the yuan and promote “capital account convertibility” the Chinese who are part of the Shanghai Free Trade (SFZ) may be able to make their own direct investments into overseas market. This would be an unprecedented move and would be one element of a government test.

The goal of the SFZ is in part to help boost China’s economic structure. It has a project that has been in the works for more than two years. Situated in Pudong New Area, it is hoped that it will ultimately span the entire Pudong district, measuring 1,210.4 square kilometers.

One of the advantages of the plan is that those using it will not be penalized with foreign exchange restrictions. There will be limits but not nearly as stringent as they currently are.

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Asia’s Financial System: ANZ

March 25th, 2014

ANZ recently released a new report called ‘Caged Tiger: The Transformation of the Asian Financial System’. The report predicts that Asia’s financial system has the potential to surpass those of both the United States and Europe combined by 2030.

Mike Smith, CEO of ANZ, stated that China will require a financial revolution to compliment the economic revolution that the nation has undergone in recent years.

According to ANZ’s report, around half of Asia’s financial assets will be attributed to China by 2050. Meanwhile, Asian bond markets are projected to expand to six times their current size over the next decade and a half.

Smith said:

“Continued progress in financial reform, deregulation and opening up to global markets in Asia will be essential to support high levels of economic growth in the region.

“China is central to this Asian Century scenario. The direction and sequencing of reform envisaged following the Third Plenum will significantly influence the direction and growth of its financial system.”

According to Smith, this will create countless opportunities throughout the region.

“Asia’s financial institutions will become increasingly important in global finance and Asia will become home to many of the world’s largest financial centers. Shanghai will grow to rival New York as a financial center. Singapore will increase its importance as a south-east Asian hub.”

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Asian Investors in Invest In Real Estate

October 7th, 2013

Recent surveys have revealed that Asian institutional investors are looking to invest $150 billion in real estate in cities such as Dubai, London, New York and Sydney.

According to CBRE, Asian investors currently manage a fifth of global institutional capital. There has been a dramatic increase in investment activity over the last few years, but Asian investors are currently investing only 1.7% of their assets in real estate.

CBRE President Chris Ludeman explained: “Asian institutional investors are already beginning to acquire assets overseas, with core assets in gateway cities being the most sought-after asset class.”

“While investors that have already had exposure in global markets will continue to acquire new assets, the next few years will see a number of new entrants to leading global real estate markets such as London and New York. Japanese institutions which to date have largely been absent from the global scene, as well as Taiwanese and Chinese insurance companies will be the first to merge.”

 

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Youku to Buy Its Chief Competitor in $1 Billion Deal

September 11th, 2012

With their eyes on cutting costs and reducing competition,  Youku Inc, the owner of China’s most popular on-line video site, is moving to buy Tudou Holdings Ltd. for about $1 billion.

Tudou is one of Youku’s smaller competitors; when the merger is achieved the two internet companies together will have an easier time competing with China’s most popular online sites such as Baidu Inc and Tencent Holdings. Investors in the Chinese market are studying the deal carefully and watching how it will affect the overall economy and the specific high-tech/technology market.

The two companies issued a joint statement explaining what the deal could mean for holders of shares, or ADRs. (ADRs are American depositary receipts, which act like shares of stock in America but really represent shares in an off-shore company, in this case in China.) Within days of announcing the proposed takeover the ADR value of Tudou increased by 159 percent. In other words, for each ADR of Tudou owned, Youku will replace with 1.595 ADRs of Youku stock.

It is now up to shareholders of both Youku and Tudou to approve the deal, which is expected, but not until the third quarter of 2012. When the deal has been transacted Youku shareholders will own almost three-quarters of the new, larger company, which will take on the new nomen of Youku Tudou Inc.

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Xinjiang Looks Good to Investors

September 3rd, 2012

The autonomous region of Xinjiang Uygur in northwest China is becoming an essential part of investments in China for other Asian and European countries, said officials at the second annual China-Eurasia Expo.

“Linking China to Asian and European countries, Xinjiang has become one of the most popular investing destinations for investors from other countries,” said Erkin Imirbakhi, chairman of the Standing Committee of the Xinjiang Regional People’s Congress, at the expo’s 2012 Eurasian Investment Promotion Agencies Roundtable.

“Thanks to its geographic advantage and rich reserve of resources, Xinjiang has tremendous business opportunities that attract investors worldwide,” he said.

Foreign investment in Xinjiang has already topped $3 billion with no end in sight as 500 additional foreign investors are currently looking to get a toehold in the region. At the moment the investments are growing rapidly and they are mostly made up of energy, mining and manufacturing industries.

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Fixed- Base Operator Shanghai Hawker Showcased at Conference

April 1st, 2012

The Asian Business Aviation Conference & Exhibition (ABACE) held its annual event in March in Shanghai, hosted by the Shanghai Hawker Pacific Business Aviation Service Centre. SHPBASC is the single Fixed-base operator (FBO) at the Hongqiao International Airport, and the conference was a golden chance for Hawker to show its spots.

“What other FBO in the world gets to have 6,000 of its primary customers come and have an opportunity to see the facility up close and in person for three days?” said Carey Matthews, Shanghai Hawker Pacific’s general manager. “It cost us a lot of time and energy, but it is a superb opportunity to help aviation grow in China and also for us to grow in Shanghai.”

The conference was a sold-out smash hit, taking up the maintenance hangar for the displays while its ramp held a large exhibition pavilion. Also on hand were a large number of OEM chalets and the static displays of upwards of 30 large model business jets. The organizers said that next year should bring even more attendees who are attracted to the prospect of even more planes on exhibit.

It is expected that ABACE will utilize the venue for the next several years to come. Matthews says that this location can accommodate as many as 80 aircraft on the south ramp without interfering with the airports normal traffic.

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Australasian Companies Prefer Asia for Investments

October 11th, 2011

According to a recent report by professional services organization, Ernst & Young, it seems that these days the most preferred region for Australasian companies to make their investments is in the Asia Pacific region.  The study by the firm was conducted in September 2011, and looked at a thousand business executives around the world.

More than 70 percent of Australasian companies would choose the Asia Pacific region to make their investments, the study found.  Looking internationally, almost half of investors would likewise also choose the same region.  Out of the entire region, the main countries investors choose seem to be: China, India, Malaysia and Singapore.

Investors Priorities

When it comes to what investors are seeking, over half of the companies are focusing on growth (slightly more than a few months ago, when the figure was just under half) and 42 percent are concentrating on preserving stability (this figure has increased 9 percent from April).  Over the same time frame, there has been a decrease in the companies looking for survival (from 18 to 7 percent) which is definitely a good thing since it is indicative that economically things are looking up and that the recession isn’t necessarily paramount on every investors mind these days.  In fact, the 7 percent figure is the lowest it has been since the study began back in 2009; clearly good news for recessional worries.

China Popularity

So why is it so popular – and this has been the case for a long time – to invest in China?  According to an article in Seeking Alpha, there are five main reasons.  First, the country’s huge population (which is almost double of that of America) results in a large customer count. Second, the amount of different types of investments available due to the sheer volume of the companies and businesses there.  Third, the national pride that exists in the country’s companies.  Fourth, the idea of sovereign protection in the country; China is working on encouraging its citizens to increase consumption in the country.  Fifth, the recent appreciation of the Yuan.

So it makes sense that investors are looking towards Asia – and more specifically China – to put their capital.

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