Economics, Finance and Information Technology

Give a more longer term perspective of Economic trends and the Macroeconomic and Monetary Interdependence of the Global Economy. With the Background of this approach the blog will deal with the implications for Investment decisions. The author believes that China and the Asia Pacific Region are and will be the powerhouse for the global economic growth for years to come. It will also cover IT because of its momentum driver for economic growth.

Tuesday, 18 February 2014

Empire State index retreats in February

Manufacturing activity in the New York region gave up most of the strong gains made during the prior month although it remained in positive territory, according to data released Tuesday.

The report fits a picture of a manufacturing sector struggling with severe winter weather.

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The Empire State index slipped to 4.5 in February after soaring to 12.5 in January, which was the highest level since May 2012, according to the manufacturing survey released by the New York Federal Reserve.

The retreat was bigger than expected. Economists surveyed by MarketWatch had expected the index to only weaken slightly to 9.0. See MarketWatch economic calendar.

The Empire Sate is often the first of a host of regional manufacturing sentiment gauges to be released. It can be volatile from month to month but its timeliness makes it a fairly closely followed indicator.

Stock futures fell after the Empire State report was released, while Treasury prices gained, moving yields lower.

Details

Most of the details of the report were soft.

The new orders index dropped to a negative 0.2 in February from a two-year high of 11 in January.

Unfilled orders, another forward-looking component, remained in negative territory.

The shipments index plunged to 2.1 in February from 15.5 in the prior month.

The employment indexes were little changed, indicating a modest increase in employment levels.

Indexes for the outlook in six months continued to convey optimism.

The index for expected general business conditions rose to 39.0 in February from 37.5 in the prior month.

But expected capital expenditures in the next six months fell ten points to 2.5 in February, a multiyear low.

Source: Marketwatch

European stocks drop after German ZEW data

European stock markets stayed lower on Tuesday after the German ZEW survey indicated investors are less optimistic about the economic future in the euro zone’s largest economy than they were a month ago.

The Stoxx Europe 600 index lost 0.4% to 333.08, erasing a 0.4% gain from Monday.

Source: marketwatch

German investor confidence unexpectedly slides

German investor confidence dropped in February, with the ZEW indicator of economic sentiment declining 6 points to 55.7 and missing analysts expectations of a 62.7 print. The drop marks the second weakening in a row, after the January survey fell to 61.7, after reaching a seven-year high of 62 in December. The current-situation assessment, however, was more upbeat and gained 8.8 points in February to 50, reaching its highest level since August 2011. "This month's decline in economic expectations must not be overstated. The majority of surveyed financial market experts remain optimistic," ZEW-President Clemens Fuest, said in the release. Expectations for the euro zone also declined in February, shedding 4.8 points to 68.5.

Source: marketwatch

World shares get Japanese boost, yen lags

Sharp gains in Tokyo pulled global stocks higher on Tuesday after the Bank of Japan pumped more stimulus into the economy, hitting the yen, while caution before German data kept European share markets just below recent highs.

The largesse, in the form of an expanded loan programme to Japan's commercial banks, was partially offset by action to rein in lending in China and more hawkish comments on rate rises in Australia. [ID:nL3N0LN16Y][ID:nRUAHDEA4E]

The subsequent 3.5 percent gain for Japan's Nikkei <.N225> contrasted with the rest of Asia <.MIAPJ0000PUS> but still helped the MSCI World index <.MIWO00000PUS> edge back closer to the high it hit prior to January's emerging market-led selloff.

The index is now just 0.4 percent off that peak, helped by a 0.2 percent gain on Tuesday that was buoyed in turn by London-listed mining heavyweight BHP Billiton , which rose after forecast-beating results. [ID:nL3N0LM15U]

"I think on a valuation basis stocks still aren't expensive," said Matt Basi, head of sales trading at CMC Markets. "It's natural after the run-up that we saw last year, there's still money parked on the sidelines waiting to do a bit of bargain hunting."

In Europe, with base metals weaker on demand concerns , the BHP gain was not enough stop Basic Resources <.SXPP> weighing on the pan-regional FTSEurofirst 300 <.FTEU3>, which edged lower after rising for 8 out of the 9 last sessions.

Traders flagged some caution ahead of ZEW sentiment data in Germany, due at 1000 GMT, although a positive reading could lend fresh support to the region's equities after Germany and France posted stronger than expected growth data. [ID:nL5N0LJ1J6]

"Any further improvement (in the ZEW) would back the idea that the current recovery has legs, with business confidence returning to all euro zone member states and not only to Germany," Credit Agricole said in a note.

German Bund futures edged slightly higher to trade up 17 ticks on the day.

U.S. stock futures pointed to a marginally higher open later in the day, a return to work for many after a three-day weekend.

YEN LOSES GROUND

The big loser from the BoJ action and subsequent bank-led Nikkei rally was the yen, which lost ground against all of its major currency peers and saw the dollar gain 0.7 percent to hit a two-week high of 102.745 yen .

While partly a result of recent data-led dollar weakness, it nevertheless helped the dollar edge higher against a basket of currencies <.DXY>. The euro also rose against the yen , hitting a 2-1/2 week high, but was flat against the dollar .

A run of weak U.S. data - most recently manufacturing output and the last two major payrolls numbers - has put the dollar under pressure and led to fresh speculation about the likely pace at which the U.S. will withdraw its economic stimulus.

That helped gold and silver weather some profit-taking to hold near 3-1/2-month peaks hit on Monday, with gold trading at $1,328.30 per ounce and silver at $21.64.

Source: Reuters

BOJ keeps base money target intact as widely expected

The Bank of Japan maintained its expansionary monetary policy on Tuesday and extended special loan programs to help buoy economic growth, signalling its resolve to keep the positive mood generated by premier Shinzo Abe's reflationary policies from fading.

The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away.

But the Nikkei stock average <.N225> surged 3.1 percent and the yen sagged on its decision to extend special loan facilities by one year and double the size of funds available to banks. [ID:nL3N0I71QM]

BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash.

"We have an engine with big horsepower, so it makes sense to have stronger tires," he told reporters after the decision.

While some investors viewed the loan program expansion as a policy signal the BOJ may take a more accommodative stance if necessary, Masashi Murata, senior currency strategist at Brown Brothers Harriman, cautioned that the reaction in the Japanese government bond market suggested this was not the case.

"Bank shares drove the Nikkei, which drove the yen, but JGBs did not react much," he said.

As widely expected, the BOJ on Tuesday maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589-$687 billion).

The central bank also stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world's third-largest economy can weather the pain from a sales tax increase in April without additional stimulus.

"The BOJ already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo.

Source: Reuters

Sony Beats Its PS4 Sales Target, With 5.3M Consoles Sold In 3-Months

Sony’s PlayStation 4 went on sale in North America in time for the holiday season three months ago, and in Western Europe on November 29 last year — and has yet to hit shelves in the company’s home market of Japan — but sales of the gaming console are still going strong.

Sony has surpassed it own full-year target of five million units by the end of March, reporting today (via Reuters) that it had sold 5.3 million units as of February 8.

This comes days after Sony tweeted that the PS4 had been the best selling console in the U.S. in January — beating out Microsoft’s Xbox One, which launched on November 22, althoughRedmond claimed the top spot for number of games sold.

Judging by today’s data, Sony’s PS4 is maintaining that early lead, with one core console country left to come in its current rollout schedule.

The PlayStation 4 is due to go on sale in Japan on February 22, kicking off with a live-streamed launch event at the Sony building in Tokyo. Microsoft has yet to nail down a firm launch date for the Xbox One in Japan, beyond saying it will land there sometime in 2014.

Last month, rival Japanese gaming giant Nintendo reported a sales target miss for its controller/console combo, the Wii U – and slashed sales expectations by almost 70% — as it struggles to compete with, on the one hand, home console heavyweights like the PS4 and, at the other end of the market, smartphones being used for casual gaming.

Source: TechCrunch

Language-Learning Platform TutorGroup Raises $100M From Investors Including Alibaba

Source: TechCrunch
English-learning platform TutorGroup announced that it has raised a $100 million Series B round from investors including Chinese Internet giant Alibaba Group, Singaporean investment firm Temasek, and Qiming Venture Partners. TutorGroup says it plans to use the funding to grow its business in Asia and expand in the Americas.

Its massive Series B will help TutorGroup compete with online-learning platforms likeCoursera as they prepare to enter China. This latest round of funding brings the total TutorGroup has raised so far to $115 million. Launched in 2004, TutorGroup’s international headquarters are in San Francisco and its main products are VIPABC and TutorABC, which are geared toward English-language students in China, Hong Kong, and Taiwan. TutorMing, on the other hand, is for people who want to learn Chinese. The company connects 2,000 teachers in 30 countries with language students through real-time class sessions. TutorGroup’s technology platform has allowed it to scale up by automatically recommending class size, learning pace, and course content.

TutorGroup says that it expects the adult English language-learning market within China to grow 25% annually and reach more than $21 billion by 2015. In China alone, the company expects sales to experience a triple-digit annual growth rate in the next few years.

In a statement, J.P. Gan, the managing partner of Qiming, said: “TutorGroup has experienced incredible growth since the last round of funding nearly two years ago. They are the online language learning leader across Asia, and their technology and platform are perfectly positioned to help them expand their lead and further scale, not just in Asia, but in the Americas as well. We look forward to our continued relationship with TutorGroup, as they become the world’s leading online education platform.”

Telefónica Expands Wayra Accelerator Network To Asia Via Tie-Up With China’s VIV Incubator

Source: TechCrunch

Telefónica’s global network of 14 Wayra Academies, which each incubate a yearly crop of tech startups in the hopes of spotting the next big thing so their carrier overlord doesn’t have to, has gained a new addition to that tally — via a partnership with Chinese incubator Virtue Inno Valley (VIV).

In a press release announcing the partnership today, the pair said they will share resources and “opportunities” to promote each others’ businesses in China and on a global scale. This will include establishing a Coordination Committee to oversee joint actions that will include Wayra and VIV staff.

It’s the thirteenth country Wayra has reached into, and its first foray into Asia. To date, the Academy network’s focus has coincided with Telefónica’s global market strengths, by being concentrated on Latin America and Western Europe.

But today’s partnership with VIV, which is backed by Beijing’s Tsinghua University, expands the reach of the Wayra network into a whole new global region — via a tie-up with an incubator that apparently plays a significant role in telecoms, media & technology (TMT) startup acceleration in China.

According to data shared by the pair, the vast majority (80-90%) of Chinese entrepreneurial projects in the TMT sector will go through the selection pool of VIV. They added that the Tsinghua TMT alumni has included “all key members of the Chinese angel investment community, covering the majority of TMT related entrepreneurial projects in China”.

VIV’s links with “top Chinese OTTs” such as Tencent, Alibaba, Baidu and Sohu — and also the Chinese government — are also lauded.

The Wayra-VIV partnership does not appear to involve any rebranding — so it doesn’t look as if VIV will become ‘Wayra China’ (except, colloquially perhaps). But VIV will become a member of the Wayra Global Alliance and, consequently, get access to Wayra’s global network of academies — giving VIV startups a route out to international markets and the possibility for their products to reach Telefónica’s 320M customer base, which spans 24 global countries.

Chinese technology companies can and do build huge user-bases for their products at home — in recent times, in the messaging space, a strong example would be Tencent’s Weixin/WeChat platform (which had some 270M monthly active users as of Q3 last year).

However, translating such domestic success into significant international traction has tended to be more difficult for Chinese tech companies — ergo, the Wayra link may offer some help for regional startups to bridge the gap between success in their home market and building a substantial user-base in the rest of the world, via access to international market mentoring and other resources, including non-Chinese investors.

“Selected Chinese TMT start-ups accelerated by Virtue Inno Valley will have the opportunity to go international through the Wayra global network, including extensive international mentor, partnership and investor resources,” noted Gonzalo Martin-Villa, CEO of Wayra, in a statement.

On the flip side, from Wayra’s point of view, access to the massive Chinese Internet user market is clearly a huge draw — especially as it’s a region where the incubator network lacks its own boots on the ground.

“The Wayra Global Alliance is born with the vision to create a great international network of innovation detection and reduce the gap of investment and commercial opportunities between geographical regions through technology. Thus, we are very happy to extend our global footprint to China through our alliance with Virtue Inno Valley, which provides us with immediate access to early stage innovations emerging from the largest TMT market in the world with 1.4 billion population and already more than 800 million mobile internet users,” added Martin-Villa.

“In the past years, we have consolidated operations in Europe and Latin America, and extending the Wayra network to Asia is a great step for us to create something remarkable in the start-up industry.”

Monday, 17 February 2014

WSJ:Big IPOs Don't Mean Big Gains in China

The Wall Street Journal reports "China's newly reopened initial public offering market shows that large deals don't necessarily lead to big gains for investors.

Although all 45 companies that have listed in China since its securities regulator ended a more than yearlong moratorium on IPOs in late December are trading above their listing prices, it is companies in the consumption and information-technology sectors championed by Beijing, or those that were priced cheaply, that are posting the sharpest gains".

China's biggest IPO so far this year, that of coal producer Shaanxi Coal Industry Co., which raised 4.0 billion yuan ($660 million), is the weakest gainer with a 17% increase. At the other end of the spectrum is Beijing UTour International Travel Service Co. , which raised a relatively modest 337 million yuan but is trading almost three times its IPO price.

"New listings soared mainly because of investors' pent-up demand for new stocks—many of them don't have a prosperous outlook," said Amy Lin, an analyst with Capital Securities.

The China Securities Regulatory Commission stopped approving IPOs in October 2012, only allowing them to resume after overhauling rules in order to prevent offerings from being overpriced. Prior to the moratorium, new listings in the country usually soared on the first day of trading, but often fell, performing less well than the broader market.

The pricing issues, coupled with concerns about China's economy, weighed on the domestic stock market. The benchmark Shanghai Composite Index fell 35% between 2010 and 2013; it is up 0.9% so far this year.

Shaanxi Coal, which said in its listing prospectus it expects 2013 net profit to fall by between 42% and 45% from 6.42 billion yuan in 2012, managed to complete China's largest IPO so far this year in January. The stock's rise from its IPO price exceeds gains in the broader market over the same period, but the miner faces challenges.

More than 90% of the companies that have listed since the securities regulator resumed approving IPOs posted gains of at least 40% on the first day of trading, and nearly half have doubled from their IPO prices. Information-technology companies, commercial services firms and manufacturers in the clean energy and environmental sectors are among the strongest gainers.

"Those set to benefit from government support typically attract stronger interests than cyclical companies like Shaanxi Coal," Ms. Lin said, though she noted that hopes for an early pop, or surge in price immediately after a listing, underpin demand for most IPO stocks.

WSJ: China January Trade Data Accurate, Ministry Says

The Wall Street Journal reports,"China's higher-than-expected January export data weren't inflated, the Ministry of Commerce said on Tuesday".

"Worries the monthly figures were distorted by arbitrage-driven false reporting are "speculation and groundless," ministry spokesman Shen Danyang said at a news briefing".

"Overall the trade figures are reasonable," Mr. Shen said.

"Exports of important products including cars and consumer goods made good gains in large markets, he said.

Exports unexpectedly jumped 10.6% on year in January—higher than 4.3% growth in December, official customs data show.

Growth was ahead of a median 0.1% rise forecast by economists polled by The Wall Street Journal. Strong exports in January last year would make this year's growth."