Wall St. Week Ahead: Investors to watch Fed minutes, jobs

Investors in U.S. stocks will look to Washington this week, awaiting key jobs data and minutes from the Federal Reserve's most recent meeting, when the central bank decided to cut its unprecedented monetary stimulus.

Minutes from the December 17-18 meeting, after which the central bank announced its plan to reduce monthly asset purchases by $10 billion to $75 billion, could give further insight into the reasons behind the decision and offer clues about how quickly the Fed will wind down the stimulus. The minutes will be released on Wednesday.

Stocks rallied following the Fed's decision because it confirmed to many that the U.S. economy was on firmer footing and ended uncertainty over when the central bank would finally reduce its stimulus, which was the driver of the S&P 500's gain of nearly 30 percent last year.

Recent data, including Thursday's factory activity report, confirmed underlying strength in the economy, suggesting the Fed was justified in its move.

But investors will be anxious to see whether that strength also is evident in the December U.S. nonfarm payrolls report, due on Friday. The Fed has tied its policy in part to jobs data. In its December announcement, the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the U.S. jobless rate falls below 6.5 percent.

"The expectation is, we're going to hear things are good. Otherwise, why would they have tapered?" said Rex Macey, chief investment officer of Wilmington Trust Investment Advisors, based in Wilmington, Delaware.

U.S. employers are expected to have added 197,000 jobs in December, down slightly from the 203,000 jobs added in November, according to economists polled by Reuters. The U.S. unemployment rate is expected to remain at a five-year low of 7.0 percent.

The Fed's decision to trim its stimulus in December came as a surprise to many investors, who had expected the Fed to delay such a decision until early in 2014.

Signs of weakness in economic data could suggest that the Fed acted too soon and give investors reasons to sell, especially as last year's huge rally left investors braced for a period of consolidation.

Source: Reuters

Dollar edges up after Bernanke's optimism on U.S. economy

The dollar held steady in early Asian trading on Monday, supported by an upbeat outlook on the U.S. economy by outgoing Federal Reserve Chairman Ben Bernanke that fanned expectations of more stimulus reduction from the U.S. central bank.

Many market participants in Tokyo returned from the New Year holiday on Monday, to find that the yen slumped to a fresh five-year nadir of 105.45 yen against the dollar on Thursday, before retracing slightly. On Monday, the dollar was buying 104.89 yen, up about 0.1 percent on the day.

The dollar index, which tracks the greenback against a basket of six major currencies, rose about 0.1 percent to 80.860

Bernanke, who will leave the helm of the Fed at the end of this month, heightened market expectations that the central bank will continue to scale back its bond purchases in 2014, although he tempered his rosy assessment by repeating that the overall recovery "remains incomplete.

Still, his comments pushed the yield on benchmark 10-year U.S. Treasuries up to 3 percent, which increased the greenback's appeal and gave investors no incentive to further pare their yen-short positions.

"Market positioning is still extreme, suggesting a vulnerability in the market," strategists at Brown Brothers Harriman said in a note to clients.

"However, with Fed tapering and U.S. rates firm, many look for the yen to weaken sharply this year. This will likely encourage dollar buying on pullbacks," they said.

Richmond Federal Reserve President Jeffrey Lacker also lent some luster to the dollar, telling an event in Baltimore he expects the Fed might raise short-term interest rates from zero in early 2015 and perhaps sooner if the economy strengthens more than forecast this year.

The first full trading week of the year could offer investors some more clues about the dollar's direction in the months ahead.

The minutes of the U.S. Federal Reserve's December policy meeting will be released on Wednesday. Central bank policy makers decided at that meeting that they would begin to pare stimulus, and cut asset purchases by $10 billion to $75 billion a month. The minutes could hint at the timing and pace of any further reductions to the Fed's stimulus.

Source: Reuters

Hagel seeks Japan's improved ties with neighbors

U.S. Defense Secretary Chuck Hagel Saturday called on Japan to improve relations with its Asian neighbors.

Hagel made the request during telephone talks with Japanese Defense Minister Itsunori Onodera.

Hagel "underscored the importance of Japan taking steps to improve relations with its neighbors," Defense Department spokesman John Kirby said in a readout of the talks.

Source:  Jiji Press

China: Easing factory activity weighs on services, retail industry stands out.

Non manufacturing PMI dipped slightly in December, but continues to expand.

Falling temperature seems to have chilled China’s economic growth approaching year-end. The country’s non-manufacturing purchasing managers index is down to 54.6 last month, a touch lower from the figure in November.

While a reading above 50 shows expansion, experts acknowledge that the ease in industrial production has spilled over into the non-manufacturing areas.

"The decline is mainly due to slowing factory churn-out last month, dragging down those serving the manufacturing industry. Of course, the seasonal factor also played a role." said Cai Jin, Deputy Director, China Federation of Logistics & Purchasing.

Figures released earlier this week showed a slack in China’s manufacturing activity last month. Yet not everything shrinks in winter time. Consumption-led practices, for instance, provide a major push behind the service industry growth.

"Modern service industry, such as software, information technology, and retails all remain at high levels, with their readings near 60. Generally speaking, business activity index of the non-manufacturing sector is still fairly high." said Meng Qingxin, Director, Dept. of Services Survey Center, NBS.

Analysts also point out that new orders index remains the same as in November, providing a sound base for the industry going forward. 

Asian shares fall after China's Services PMI data

Asian shares fell to a two-week low on Monday after growth in China's services sector slowed sharply last month, raising concerns about the pace of recovery in the world's second-largest economy, while safe-haven gold climbed.

The dollar hovered near a four-week high, supported by an upbeat outlook for the U.S. economy from Federal Reserve Chairman Ben Bernanke that fanned expectations of faster stimulus reduction by the U.S. central bank.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.7 percent, reaching a two-week low and adding to a 1.1 percent drop on Friday. The index lost 1.7 percent last year, sharply underperforming U.S., Japanese and European stocks.

China's CSI300 index  sagged 2.5 percent, hitting a five-month low after the HSBC/Markit services sector Purchasing Managers' Index fell to 50.9 in December from 52.5 in the previous month, with new business expansion the slowest in six months.

The Chinese index is down 4.2 percent since the start of the year, adding to last year's 7.6 percent decline.

"What have been the principal sort of driver of the market since the beginning of the new year has been a disappointment of the Chinese PMI data," Guy Stear, Asian credit and equity strategist at Societe Generale in Hong Kong, referring to the manufacturing PMI released last week.

"The focal point of the Asian markets is more on Chinese growth and on Chinese political situation and how it's going to pan out this year, rather than worrying about how tapering will affect Asia specifically," he added.

The Thai baht fell a near four-year low of 33.09 per dollar and Thai stocks .SETI dropped 1.4 percent, hitting a 16-month trough driven by heightened political uncertainties ahead of next month's general election.

In terms of valuations, Thai equities were relatively expensive, with its 12-month forward price-to-earnings of 11.9, slightly ahead of a five-year average of 11.4 and the MSCI Asia-Pacific ex-Japan's 11.7, according to Thomson Reuters Datastream.

Japan's Nikkei share average .N225 stumbled 2.2 percent in the first trading day of 2014. The benchmark jumped 57 percent last year to mark its best annual rise since 1972 on the back of massive fiscal and monetary stimulus.

As Japanese equities took a beating, the yen got some respite against the dollar, up 0.5 percent at 104.29 yen, not far from a two-week high of 104.08 yen touched last Friday.

Against a basket of major currencies, the dollar .DXY added 0.1 percent to near a four-week high set on Friday, helped by Bernanke's comments.

Bernanke, who steps down as head of the Fed at month's end, gave an upbeat assessment of the U.S. economy in coming quarters, but he tempered the good news in housing, finance and fiscal policies by repeating that the overall recovery "clearly remains incomplete".

Source: reuters

Abe gives New Year speech to constituents

Prime Minister Shinzo Abe says he hopes to overcome any difficulties this year and likened it to a good horse jumping over obstacles.

Abe made the remark to his constituents in the city of Shimonoseki, Yamaguchi Prefecture, on Saturday.2014 is the Year of the Horse, one of the 12 animals in the Chinese zodiac.
He said more than one year has passed since he took office with the goal of leading Japan into a recovery.
He said the people of Japan are showing more confidence after years of a deflationary economy and negative growth. But he said the crucial moment will soon come.
Abe said the consumption tax will rise from the current 5 percent to 8 percent in April.

Source: NewsOnJapan

Lottery companies cash in as China raises bet on punters

   Investors in Chinese online lottery platform 500.com Ltd have found their own winning ticket: the stock has nearly tripled from its $13 initial public offering price in the six weeks since its New York Stock Exchange debut.

500.com, the only Chinese lottery firm so far listed in the United States, is among a handful of listed companies that stand to benefit as China whittles down thousands of private lottery operators to a handful of licensed and regulated firms serving more than 400 million punters, say industry experts.

"Over the next five years it is very clear that the Chinese market will continue to grow very quickly and the government regulatory regime will become more open and transparent," said Zhengming Pan, chief financial officer at 500.com.

Spurred by rising disposable income, a strong appetite for gambling and more sophisticated games, China's lottery market has boomed with customers splurging some $23 billion in 2012, compared to $37 billion by punters in the world's biggest lottery market in the United States.

With 20 percent growth rates projected for the next three years, China is expected to overtake the United States and leap into the top spot by 2015. The U.S. lottery market is expected to show single digit growth during the same period.

Sales revenue generated by the lottery industry in the United States was $71 billion in 2012 compared with $43 billion in China, according to data from China's Ministry of Finance and the U.S.-based North American Association of State and Provincial Lotteries.

With just 7-8 percent of Chinese adults buying lottery tickets compared to 70-80 percent of adults in the wider Asia Pacific region, the government is keen to lure more punters with improved payouts, new products and wider distribution channels, industry executives say.

"The Chinese government wants to consolidate the current lottery market, making it easier to control and regulate," said Hoffman Ma, deputy chairman of Success Universe Group Ltd, a leisure and gaming company authorized to provide sports lottery sales agency services in three provinces.

"They are seeking operators with stable platforms and want to ensure that all bets that come through will pay tax."

Unlike the United States and Europe, where prizes can climb into the hundreds of millions of dollars, China caps jackpots at 10 million yuan ($1.65 million). Tickets sell for 2 yuan to 200 yuan, with proceeds supporting sports and welfare charities.

NEW RULES

Lottery products are typically sold through authorized stations throughout the country in the form of physical tickets. These range from dedicated lottery stores to counters in supermarkets, post offices and gas stations.

Beijing is expected to announce new rules in 2014 that will clarify and detail legislation in the fast growing industry. New license approvals are likely to be issued within the next two years, say industry experts, but specifics remain unclear.

Companies like Okooo.com, the web platform of lottery terminal provider REXlot Holdings Ltd, which have a solid reputation, technological capabilities and government background could win new licenses, said research house Cinda International.

Okooo.com processed lottery orders worth 6 billion yuan in 2012, and became the exclusive partner of state-backed media website People.cn Co. Ltd in August.

Just a few years ago, China's lottery market consisted largely of traditional paper lotto tickets. Now, single match games, where players bet on the results of basketball or football, video lottery terminals and scratch games, are more common. Internet and telephone became legal lottery channels at the end of 2012, but online tickets still have to be backed by paper stubs until an actual online market is created.

The Chinese government has so far contained casino gambling to Macau, in part because of social concerns. Officials consider the lottery system more sanitized, with fewer negative effects on local citizens, said Chen Haiping, a professor at Beijing Normal University's lottery research centre.

"It is not realistic to completely ban all forms of gambling. If the government opens gambling, they face ethical issues but if they do not, neighboring countries will continue to attract Chinese tourists to gamble and from the government's point of view that is a loss of state income," said Chen.

Hong Kong-listed AGTech Holdings Ltd won government approval to launch its virtual sports games in some provinces and is expected to roll out games like the Grand Prix-based Lucky Racing Gaming and football game Electronic Ball Lottery nationally in 2014.

These games are aimed at middle-to upper-income Chinese rather than lower income workers who account for the bulk of lottery purchasers. AG Tech's share price has surged some 205 percent over the past year.

John Sun, AGTech's chairman and chief executive, expects the industry to become more open in the next five years with new products and channels. He remains concerned, however, that the industry needs a strong gaming commission or regulator to set standards and monitor operators.

"In the gaming industry, integrity is the most critical foundation," he said. "If you don't have good compliance or a good check and balance, the degree of credibility is a big issue."

Source: reuters

Thai tensions to rise as power struggle intensifies

Thailand is heading for a political showdown as protesters plan to shut down Bangkok next week to sabotage an election while the government's supporters have vowed to stage massive counter-rallies in the country's provinces.

Prime Minister Yingluck Shinawatra is facing swelling opposition in Bangkok ahead of the February 2 election in which her supporters in the rural north and northeast are expected to return her to power - if the vote goes ahead.

Thousands of demonstrators marched through Bangkok on Sunday as a prelude to rallies starting on January 13, when they plan to block government offices and occupy key intersections for days in a bid to force Yingluck out and scuttle the poll.

The protesters accuse Yingluck of being a puppet of her self-exiled brother and former premier, Thaksin Shinawatra. They want an appointed "people's council" to oversee a vague reform platform, which includes electoral changes and decentralising power over a 12-month period before any election.

Thai markets are expected to face pressure this week over the growing uncertainty. The baht slid on Friday to its lowest against the dollar since February 2010 and the benchmark stock index has lost 15 percent since early November, when the latest crisis began.

"We will keep walking, we won't stop," protest leader Suthep Thaugsuban, a former top opposition lawmaker, said during Sunday's march.

"We will walk until we win and we won't give up."

Yingluck, 46, is refusing to postpone the poll, which she says would be unconstitutional. Any election delay could heighten the uncertainty and make it harder for her caretaker government to function.

Yingluck enjoyed two smooth years in power until November, when her Puea Thai Party tried to force through an unpopular amnesty bill that would have nullified a 2008 graft conviction against Thaksin and allowed him to return a free man. Protests erupted.

The battle, an outbreak of turmoil stretching back eight years, broadly pits Bangkok's middle classes, southerners and an old-money oligarchy of royalists, conservatives and generals threatened by Thaksin's rise, against his mostly rural supporters and tycoons who prospered under his rule.

POWERFUL INSTITUTIONS

Despite her determination to press ahead, Yingluck is looking more isolated the longer the protests drag on, with intervention by the judiciary or the military a possibility to break the deadlock.

Thailand's military has launched or attempted 18 coups in 81 years of fragile democracy, including the overthrow of Thaksin in 2006.

The military isn't rallying behind Yingluck. Its top general, Prayuth Chan-ocha, last month said "the door was neither open nor closed" when asked about intervention to defuse the crisis.

The National Counter Corruption Commission will also decide on Tuesday whether to press charges against 381 former lawmakers for trying to change the constitution to transform the Senate from a semi-appointed to a fully elected chamber, which the Constitutional Court in November ruled was unlawful.

It is unclear what the fallout would be from any subsequent ruling against the former legislators.

The impasse is also a risk for the economy, Southeast Asia's second-biggest, which is struggling with weak exports and consumer spending. Tourism, worth 9 percent of the economy, is suffering from the turmoil and plans for $65 billion in infrastructure spending intended to offset export losses will be delayed until the end of the year.

It has been a tough year-end period for Yingluck, who has avoided Bangkok for much of it, choosing instead to tour her Puea Thai Party's north and northeast strongholds.

Her supporters, known as the "red shirts", plan rallies in dozens of provinces to run simultaneously with the Bangkok blockade by their rivals. The red shirts have threatened pandemonium if the election is derailed or if the military intervenes.

Demonstrations have been mostly peaceful so far, although face-offs between riot police and anti-government protesters turned ugly last month, with scores hospitalised and three people shot dead by mystery gunmen.

Yingluck said on Sunday she was worried about unrest.

"The election may not be a panacea to solve the problems immediately, but the election is the best medicine to help solve conflict under the democratic system," Yingluck said in a post on her Facebook page.

Source: Reuters

App developers see wearable devices as next big thing

Wearable computers like Google Glass and the Samsung Galaxy Gear watch may not have caught fire yet, but that hasn't stopped mobile game developers from rushing to create apps for the new devices, eager to seize what they hope is the next big moment in consumer technology.

Niccolo DeMasi, the CEO of mobile games maker Glu Mobile, compares the potential of wearables to that of Apple Inc's iPhone launch in 2007 - an event that was the catalyst to create much of the mobile app world that exists now.

DeMasi and others are betting that by developing compelling apps designed with the wearables' special features in mind, they can create overwhelming demand for the products.

"A whole new app ecosystem is going to be born," said Shawn Hardin, chief executive officer of Mind Pirate, which will release "Global Food Fight," its first game for Google Glass, this month. "Those who are going to make that happen in a big way are going to be valuable companies because of it, and those who wait too late won't be a part of it."

The market for mobile game apps is expected to grow to $17 billion (£10 billion) this year from just $6 billion in 2010, analysts said, and wearables could fuel growth in the years to come.

An array of new smartwatches and devices like fitness tracker Fitbit will go on display this week at the Consumers Electronics Show (CES) in Las Vegas, heralding a potential breakthrough for the devices in 2014.

Despite the slow start, Juniper Research expects more than 130 million smart wearable devices will ship by 2018. Moreover, global shipments of wearable "smart glasses" alone will reach 10 million each year by 2018, compared with an estimated 87,000 in 2013, according to the research firm.

Source: Reuters

Toyota sells over 900,000 vehicles in China in 2013, beats sales target - executives

Toyota Motor Corp  and its two local joint-venture partners sold more than 900,000 vehicles in China  last year, two executives said on Monday, beating its annual sales target after tensions eased in a territorial row between Japan and China.

One of the executives said Toyota and its Chinese partners sold about 916,400 vehicles in China last year on a preliminary basis, up from about 840,000 vehicles sold in 2012. The other executive said sales were over 900,000 vehicles. Both declined to be named because they were not authorised to speak to reporters.

The executives said key new products, including the significantly redesigned RAV4 Toyota-branded compact sport-utility vehicle which was launched during the fourth quarter, helped recover much of the ground the company lost after a dispute over a group of islets in the East China Sea fanned anti-Japan sentiment in China.

Violent protests and calls for boycotts of Japanese products broke out across China in 2012 after Japan nationalised two East China Sea islands, known as the Diaoyu in Chinese and Senkaku in Japanese, by buying them from their private owners. Japanese car makers sales in China fell sharply as a result.

Toyota's Beijing-based spokesman Takanori Yokoi said the company plans to release its China sales data later on Monday, and declined further comment.

During the first 11 months of this year, Toyota sold about 809,000 vehicles, up 7.9 percent from a year earlier, it said last month.

While sales momentum by Toyota and other Japanese automakers, recovered to pre-crisis levels toward the last two months of 2013, they aren't without fresh worries.

Among them is Japanese Prime Minister Shinzo Abe's visit last month to the Yasukuni Shrine seen by critics as a symbol of Japan's wartime aggression, which infuriated China and South Korea and prompted concern from the United States about deteriorating ties between the North Asian neighbours.

Also likely to pressure the performance of Toyota and other Japanese brands in China is a surge in sales volume by Ford Motor Co.

A Ford official speaking on condition of anonymity said the U.S. automaker most definitely outsold Toyota in China last year. He declined to elaborate. Ford is due to release its China sales data for December and 2013 later on Monday.

Source: Reuters

'Life-threatening' cold bites U.S. Midwest, heads east

As the Midwestern United States shivered through the region's lowest temperatures in two decades and forecasters warned that life-threatening cold was heading eastward, officials in Chicago and other districts said schools would be closed on Monday.

Icy conditions snarled travel across the Midwest and thousands of flights were cancelled or delayed, days after the Northeast was hammered by the first winter storm of the season.

"The coldest temperatures in almost two decades will spread into the northern and central U.S. today behind an artic cold front," the National Weather Service said on Sunday. "Combined with gusty winds, these temperatures will result in life-threatening wind chill values as low as 60 degrees below zero (Fahrenheit/minus 51 degrees Celsius)."

In weather that cold, frostbite can set in on uncovered skin in a matter of minutes, experts warned.

Minnesota Governor Mark Dayton ordered all public schools in the state closed on Monday to protect children from dangerously cold weather.

Chicago public schools followed suit - reversing an earlier decision - saying in a statement on its website that it would be dangerous for children to commute to school amid sub-zero temperatures and high winds.

The NWS said the widespread chill was a result of a relatively infrequent alignment of weather conditions, allowing the Artic polar vortex to be displaced unusually far south.

"The weather pattern across North America right now is set up to be very favourable for the southward transport of Arctic air," said Bob Oravec, a National Weather Service meteorologist.

"It's not going to be long-lived," he added. "By the end of the week the temperatures definitely start to moderate across the whole of the country."

Source: Reuters

China: Officials say cooperation with car designers is crucial

China’s inspection authority vows to improve car quality inspection in 2014. But officials say it’s still very difficult for them to find ALL the problematic cars.

Although car makers in China are no longer as ashamed to admit defects in their cars, officials say effective quality inspection will not be possible without the help from car designers.

"We don’t control the technology, so we need car designers to work with us by providing relevant technical information. Only by doing so, can we do some in-depth analysis. But now there’s a significant information asymmetry between what we have and what they have." said Xiao Lingyun, Director of Car Recall Dept., General Admin. of Quality Supervision, Inspection & Quarantine.

Official numbers from China’s quality administration shows the country is lagging far behind developed countries in terms of inspection capacity. While the number of cars recalled in the U.S. in 2012 was 110% higher than the cars sold in the country that year, that number only accounted for 16 percent of all cars sold in China in the same year.

"We are going to enhance recalls for cars with defects in 2014. We will strengthen local quality bureaus’ inspection into auto makers as well as improve technical teams’ investigation capacity." said Yan Fengmin, Director of Law Enforcement, General Admin. of Quality Supervision, Inspection & Quarantine.

Officials say the completion of recalls becomes even more difficult when only 8 in 10 cars actually go back to the sellers. Some car owners simply don’t think there are major problems with their cars. Officials say it is crucial for owners to act upon their recall notices immediately by bringing their cars back to the sellers.

"This is for your own safety and for other cars and drivers on the road." said Sun Ning, Assistant Director, Center of Defected Product, General Admin. of Quality Supervision, Inspection & Quarantine.

Official numbers in 2013 show the three most frequent defects are identified in engine, power transmission and brake systems.

Source: CCTV

Japan shines for investment banks, brokerages

Investment banks and brokerages across Asia were bolstered last year by a surge of activity in Japan's equity markets, masking an otherwise mild year for stock trading and share issuance in the region.

The volume of Japanese shares changing hands more than doubled in 2013 from the previous year as traders rushed to bet on Japan's aggressive approach to stoking growth and ending deflation.That led to a boom in commissions that brokers earn to handle orders from institutional investors such as large fund managers, and some investment banks hired new staff in Tokyo to handle the flood of orders as the market rallied.
Consulting firm Greenwich Associates estimates that as of August, institutional commissions for Japanese stock trading had risen at least 40% in yen terms from the same period a year earlier, easily outpacing the consulting firm's estimates for the rest of Asia.
Japan also kept traders busy funneling newly issued shares to investors. Equity capital market revenue drawn from the country nearly doubled from 2012 to $1.38 billion, according to data provider Dealogic. That compares with a 13% decline in revenue from China, which came close to snapping a three-year streak at the top of the heap with $1.4 billion in revenue last year.

Source: the Wall Street Journal

Japan: Thousands stranded in 'train hotels'

About 2,300 people rested in Shinkansen "train hotels" Saturday morning as a result of a Tokyo fire that suspended services on the Tokaido Shinkansen Line for hours.

The Metropolitan Police Department and the Tokyo Fire Department began an on-site inspection Saturday of the fire, which started Friday morning at a building near East Japan Railway Co.'s Yurakucho Station in Chiyoda Ward, Tokyo.The final Tokaido Shinakansen train arrived at Tokyo Station at 1:55 a.m. on Saturday, about two hours behind schedule. Passengers who missed their connections due to the delays were allowed to stay in a "train hotel" comprising three 16-car trains.

As many as about 2,200 people rested in the "train hotel" until about 5 a.m. Saturday morning, when the conventional lines were running again.

Source:  The Japan News

China to launch a restructuring plan in its rare earth industry.

China is expected to launch a restructuring plan in its rare earth industry. Sources familiar with the matter says the State Council, China’s top administrative authority, has passed a proposal by the Ministry of Industries and Information Technology to form six giant companies in the industry.

The plan aims to increase efficiency in the fragmented and polluting industry.

Source: CCTV

China to introduce three-tier water pricing

China has vowed to establish a water pricing system for households in cities across the country by the end of 2015, as part of efforts to improve water conservation.

It will introduce three pricing brackets for water consumption, with the highest users paying the most. Local governments will set their own charges according to local conditions.

The cost of water will rise as people use more, with the most use costing up to three times more. Local governments will also offer discounts for low-income families to ensure they won’t take a hit from the new pricing system.

Source:CCTV

China's December non-manufacturing PMI drops to 54.6%

China’s National Bureau of Statistics has released the purchasing managers’ index, PMI, for the non-manufacturing sector. PMI for services in December dipped to 54.6 percent, 1.4 percent down from the 56 percent in November. It mirrors a slowdown in manufacturing activity growth.

For more analysis on the just released December non-manufacturing PMI, we are joined in the studio by Professor Huo Deming from National School of Development at Peking University.

Professor Huo Deming thinks that the slowdown at the services sector and the manufacturing sector in December are only the result of a seasonal factor it is the coolest month  in the economy.
  In terms of the global economy he sees optimistic developments in the U.S. economy with greater growth
prospects, and a euro zone slow recovery, which are good for the Chinese economy.
  He also expects that the recent reforms implemented in the chinese economy, will be good for its growth for the next five years, and that unless there is sytemic risk increase in the financial sector, the economy will do well, with a growth rate of between 7% or 8%.

Source:  CCTV

Tech in China 2013: WeChat Still Rules Chinese IM Industry, Rivals Mull to Catch Up

WeChat still holds a leading position in Chinese IM industry this year, but several emerging rivals are poised to attract users and snap up market share.

Alibaba promotes Laiwangaggressively bothinternally and externally with a wild wish of30% of the market. Net Ease and China telecom partnered up to launch EasyChat, which supports calls withboth landline and mobile lines , a feature missed in WeChat.

Registered users

The users of IM tools recorded metric growth this year led by WeChat which now registered more than600 million users, with more than 100 million overseas and 271.9 million monthly active users in Q3 2013.

Location-based social app Momo has registered 80 million useres  and 13 million daily active users after two years and three months of development.

EasyChat announced more than 30 million registered users.

Alibaba’s Laiwang recorded 10 million users as of November with daily active users surged 500% MOM .

In addition to the abovementioned mainstream IM tools, Shanda developed one named Youni. Sina injected funding in WeMeet , a similar app headed by former Sina Weibo lead. Online retailor JD released IM tool Dongdong for individual customers.

Cooperation with Telecos

With the booming demands for data service, free data will be an effective selling point to attract users. Major players of the industry competed to offer free data service via cooperation with telecom carriers.

On the other hand, telecom carriers are willing to take part in such cooperation, because they want to integrate various contents into their business and provide corresponding preferential programs, which enable them to share revenues with OTT services.

WeChatpartnered upwithGuangdong Branch of China Unicom  this July to release WeChat Wo SIM card, which featureslow-budget data plan.

Veteran tech company NetEase joined the competition with EasyChat  , partnering with carrier China Telecom, and offer services other players otherwise cannot do without backing from a carrier.

EasyChat and Laiwang launched free data plan  to compete head-on with the WeChat.

Mobile Game   

WeChat hopped on the mobile gaming bandwagon by launching a number of WeChat-based mobile games. Momo followed the suit .

Source: TechNode

George Soros warns that Chinese slowdown is biggest worry in 2014

George Soros is worried about China, and we should take note.
Slower growth in Chinese manufacturing could be just the start of a new global economic threat, the financier has warned.

In the Square Mile, a brief glance at the stock market shows the impact of a slowdown in Chinese manufacturing output  last month – and the fear that this will become protracted. The FTSE 100 is down 30 points since the new year break. It includes mining companies such as Rio Tinto and Anglo American, which have strong links to the Chinese economy. Signs that the world's second-largest economy is slowing have caused the price of many commodities to fall, and helped break a 12-year bull run for the gold price. (China consumes around half of the world's iron ore and coal, and buys more than a third of its base metals.) Beijing's move to cut back on corn imports made the grain the worst-performing commodity last year, as it fell almost 40%.

Predictions that China's economy lost momentum in the final quarter of last year were underscored by figures showing that the manufacturing sector  grew at a slower pace in December as export orders weakened. Official figures can say whatever the Chinese authorities want them to say, but there is widespread agreement that the economy is suffering a longer-term slowdown.

Mark Williams at thinktank Capital Economics said the news that China has a huge  $3 trillion local government debt would fuel the fear: "Activity among large firms has turned down again and is likely to cool further as policymakers rein in local government debt. We therefore expect China's economy to slow again this year."

Soros bluntly states that three years of worrying over the eurozone should give way to worrying about China. It's not that he believes a solution has been found to the debt mountains in parts of Europe; it's just that he thinks the euro problem has reached a plateau while China could be on the skids.

He said: "The major uncertainty is not the euro but China. The growth model responsible for its rise has run out of steam."

Until recently China has thrived by restricting households' spending, effectively forcing them to save. The savings are channelled into industrial production.

Foreign exchange built up in the boom years has mostly been invested in international expansion – in Africa and in parts of Asia neglected by a previously aloof Japan.

The financial crisis showed the weakness in the idea of becoming the workshop for the world when that world couldn't afford to go on buying. To keep the wheels turning, local authorities and other government agencies were allowed to borrow.

Last year the Chinese leadership said it recognised that plan was flawed, and public sector debt needed to be cut. But when the economy slowed dramatically after borrowing was restricted, the policy was quickly reversed. The subsequent boost looks shortlived, even if China has billions of dollars in foreign exchange reserves to soften any economic blow.

Soros said: "China's leadership was right to give precedence to economic growth over structural reforms, because structural reforms, combined with fiscal austerity, push economies into a deflationary tailspin. But there is an unresolved contradiction in China's current policies: restarting the furnaces also reignites debt growth, which cannot be sustained for much longer than a couple of years."

Source: theguardian

High Hopes for China's Online Finance Companies

   Yuebao is a mutual fund tailored to Alipay users. Launched in mid-2013, 43.03 million Alipay users adopted it in half a year since its launch. A total of RMB185.3 billion ($30 bn), an average of RMB 4307 ($700)  per user account, were transferred into Yuebao that generated RMB1.70 billion in total return in half a year, disclosed Alipay, the online payments service of Alibaba Group.

It takes only one click to transfer the balance in an Alipay account to Yuebao on either the website or the mobile app, Alipay Wallet. The mutual fund is managed by THFund, a mutual fund company Alibaba bought a controlling stake in  in 2013 —  THFund raised to the second biggest mutual fund company in terms of the total assets under management in 2013, up from lower than 50th one year ago, thanks to Yuebao. Users can use the money in Yuebao for online shopping anytime they like.

Yuebao’s slogan is “14 times of the return from banks”. It sounds attractive, but Yuebao doesn’t perform better than the average mutual funds. The convenience must be a key factor in attracting users. Another attractiveness is Yuebao shows returns daily. I’ve heard people say that they’d open Alipay app daily to check returns. Not every user knows how to calculate compound returns. Knowing how much exactly you are receiving everyday must be a pleasure.

Apart from running a mutual fund by using user’s balance, there’s a bigger picture for Alipay. Before long, several Chinese Internet companies launched online mutual funds and gave them similar names, such as Suning’s Yifubao, but none could be the same with Yuebao. Alipay itself was established for Alibaba’s e-commerce marketplaces. When one user uses money in Yuebao for shopping on Alibaba’s platforms, that will be translated into transaction-based commission to Alibaba. If Yuebao is widely recognized and users would always deposit money into it, users don’t have to make payments through banks anymore. When it comes to the mutual fund itself, the more users on board and more money tansferred into it, the lower, theoretically, the risk.

Fan Zhiming, president of Alifiance for Domestic Market, said at an event last month that they’d possibly make Yuebao a default that any balance in an Alipay account would buy the mutual fund automatically.

Alifinance, the finance arm of Alibaba Group, has already disrupted China’s finance sector with services like Alipay and small loans for online retailers. In recent years, other Chinese companies also have been working on digital payments, online peer-to-peer funding or other Internet-based financial services. But in 2013 it was obvious that people placed high hopes on Internet-based financial services, seeing them to materially change the financial market in China.

One thing that raised their hope is China has been undergoing economic reforms in the past couple of years. The old manufacturing industry got into trouble and the society expected private SMEs to save the economy. But previously it was very hard for small businesses in China to get loans from state-owned banks. Hundreds of online peer-to-peer funding platforms emerged in 2013 thinking they could take advantage of the needs of small businesses. That includes Dianrong , based in Shanghai and founded by a co-founder of  US-based peer-to-peer service Lending Club.

The reform plan China’s central government released in November 2013 allows qualified private investors to set up banks. Shanda, the veteran online gaming company, is the first Internet company thatsettled in the newly established Shanghai Free Trade Zone , planning to build Internet-based financial business and a joint bank there.

Tencent joined some investors to set up a private bank. The Chinese Internet giantplans input RMB 10billion($1.64billion) into financial companies it has established in the Qianhai Shenzhen-Hong Kong financial and modern services development zone. WeChat Payment, the mobile payment solution added to the company’s flagship mobile messaging app in 2013, is a rising star in mobile payments or m-commerce in general as it has enabled businesses to add sophisticated features onto their official WeChat accounts and accept payments there. Even Alibaba felt pressure and now webpages of Taobao/Tall items are disabled to load on WeChat.

Source: TechNode

In 2013 more Chinese Tech companies tested overseas markets

We discussed on why increasingly more Chinese tech companies test the water of overseas markets. In 2013, they must feel more encouraging as there were several more successful cases. Sungy Mobile, an Android launcher and app developer with 70% users from overseas, went public on the Nasdaq. Another Chinese company that launched IPO in the US in 2013, online retailer LightIntheBox, has a majority of orders from outside China. IGG, an online gaming company that went public in Hong Kong, isn’t known as a Chinese company in many markets. Keyboard app TouchPal announced 100 million users, most being overseas.

Chinese mobile app developers spent 151% more with AppFlood, a global mobile advertising network, in the March – September 2013 period. In September, Chinese developers for the first time spent more on AppFlood than their peers in the U.S. — It must have something to do with the fact that AppFlood is founded by Chinese. But you can see from the image below that the spend by Chinese developers soared in the second half of 2013.

For Chinese developers, joining a platform like AppFlood is for users overseas. It’s no wonder only 0.6% of the total ad spend was for acquiring domestic users in the third quarter of 2013. One third of the total was for Asian users and 22% for Middle East market in the quarter.

Asian countries have always been their first overseas markets whenever Chinese companies consider expanding outside China. One reason is that Asian users, to some extent, share the same Internet culture, especially when it comes to online gaming or social. Another reason, according to AppFlood, is traffic acquisition costs for Asian users are lower.

AppFlood isn’t alone as a mobile advertising service helping Chinese apps expand overseas.Dianjoy  is another that decided to shift its focus to overseas markets as Li Wei, CEO of the company, believes 2013 is the year that Chinese apps really took off in overseas markets.

Both the Dianjoy and AppFlood found that their big clients in the year were big Chinese Internet companies. It is believed WeChat, who announced 100 million overseas users, has spent a lot money on marketing in Southeast countries. For small developers, their revenues from overseas are not big at all and wouldn’t spend much with mobile advertising services.

Besides mobile app market, the emerging sectors like hardware are comparatively easy for Chinese entrepreneurs when it comes to expanding to or start from overseas markets. Chinese makers place their gadgets onto platforms like Kickstarter to get early adopters and some funding. To ride the hardware trend, some companies are founded to help Western makers from purchasing electronic components to building prototypes, as both the component and labor costs in China are still low.

Another category of Chinese tech companies expanding overseas are those who are well established in China that want to export products or experiences. Yodo1 has made success in culturalizing and operating online games from Western companies in China. The company raised a new round of funding in 2013 , planning to bring the experience to Korea and Japan. Some tech markets like Japan have long been seen as a closed garden that outsiders could hardly conquer. Henry Fong, CEO of Yodo1, thinks that Western games are not successful in those markets is because they are far from having done well on localization.

Although WeChat claimed a large number of registered users outside of China, active users and future monetization are in doubt. It is estimated the potential in apps like Sungy Mobile’s Go Launcher is future monetization through proven Chinese approaches like gaming. But it’s unknown so far whether non-Chinese users would buy those that have been widely accepted by Chinese.

Source: TechNode

Hong Kong based Startup Stock Exchange Bigcolors will launch in Mainland China in Q2 2014

Bigcolors is a startup stock exchange which combines equity crowd-funding by a pool of investors with a trading exchange.  Bigcolors will help raise a maximum of US$100,000 for a startup idea, and for that, entrepreneurs will give up 20 percent of the company. But they can alternatively just raise US$25,000 or US$50,000 and part with 5 per cent and 10 per cent respectively. When the idea is posted on the platform, it then undergoes a two-week due diligence process by the Bigcolors team. Once approved, the idea is open to funding for eight weeks. -

Should the funding be completed ahead of this period, investors can trade options, that is, trade the rights to own shares in the future company. Bigcolors says they have grown 80% in signups week on week since launching 3 weeks ago and they have over 900 investors on the platform as well as 79 startups who have signed up for funding. They have had funding for the startups of almost $25k USD since launching. They also have funding commitments from investors of over $500,000 ready to invest in early stage startups, shared the team.

How the platform works 

Anyone can list their startup on Bigcolors, however if a startup wishes to get funding they need to initially go through a due diligence process. This involves interviews with the founders, a know your customer(KYC) background check, understanding the idea, business model and the potential of success of the idea. This process takes about 2 weeks. If the startup is approved for funding and has successfully completed the due diligence process, it can list for funding on Bigcolors. If the startup fails to reach their funding target, there is no charge for startups or investors.

“As part of our due-diligence process, we are very strict about the companies that can list and only companies that have a high chance of success are listed. Bigcolors aims to help the startups succeed by providing a platform for investors and advisors to help in the success of the startup”, adds James Giancotti, Co-Founder of Bigcolors.

If a startup listed on Bigcolors successfully reaches its funding target (within the funding period) only then can investors list their stock options on Bigcolors, and if purchased, can cash out. The funding period is eight weeks. Once the funding period has closed, the new company is formed and investors will be owners of the company. Investors are able to sell their stock privately (as with any private company).

Hong Kong has traditionally been one of the best trading hubs in the world, so mixing financing and trading startups was a perfect fit for the city. Hong Kong is also home of some of the largest capital pools in the world which helps fund the startups.

Plans for Mainland China and global expansion 

Bigcolors plans to launch in Singapore this week, with Thailand, Australia, Japan and Taiwan to follow in Q1 2014. It will launch in mainland China in Q2 2014. “In 2014 we are focused on Asia Pacific, and will use 2015 to expand to other regions such as Americas and the Middle East”, shares James.

Source: Technode