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Daily Dispatches – No small change

A significant overhaul of China’s banking sector gained momentum in recent days, with a decision by the central bank – the People’s Bank of China (PBOC) – to allow the establishment of private sector banks. Chinese website PeopleDaily.com reports that the government has given a privately funded banking sector the green light, but when this will be take effect is still to be announced.

Till now, China’s banking sector has been dominated by state-funded and controlled lenders, and a raft of shadow banks that have been blamed for the surge in credit extension and the country’s current liquidity squeeze.

Bloomberg reports today that this cash squeeze may reduce credit growth by as much as USD$122 billion, which is equal  to the size of Vietnam’s economy.

The expansion of the financial services sector is expected to help re-invigorate the country’s economic growth. Although expected to come in at 7.6% for 2013, this is below the momentum of recent years, and part of this has been blamed on lack of sufficient credit available to small and medium businesses, which are acting as a brake on more robust economic expansion.

The banking sector reform is just one of several financial services segments where China is plotting a new course. The government believes that the sector should promote the development of diversified capital markets and insurance products as well as supporting the growth of small and micro enterprises.

These are among 10 key areas the State Council has identified as areas of activity that the financial sector should support as part of the country’s continuing economic structural adjustment, according to a report in Asian Banking & Finance today.

ABF quoted from a Barclays note on the State Council’s guidelines that were issued late last week. Barclays says “…financial sector reform will likely accelerate, in particular interest rate liberalisation – raising the deposit ceiling – and capital account opening…”

First day on the job

China has announced that Ding Xuedong is the new head of its state fund, China Investment Corporation. Bloomberg says Ding’s new role will be challenging: “Ding’s need to improve the fund’s returns takes on added urgency as the US Federal Reserve prepares to slow record monetary stimulus, raising prospects for higher interest rates. He will also face increasing scrutiny over his performance as the State Administration of Foreign Exchange diversifies its portfolio into higher-yielding assets from its traditional focus on safer US Treasuries.”

Bloomberg quotes Victoria Barbary, director at the London-based Institutional Investor’s Sovereign Wealth Centre, who says it won’t be an easy job for Ding. “That’s the reason why it took some time to find a replacement,” for Lou Jiwei who stepped down to take up office as China’s Finance Minister.  “CIC is now almost fully invested and it’s not sure that they are going to get any more funds,” says Barbary.

Jobs ads going down under

Job advertisements in Australia have fallen for the fourth consecutive month and are 19% below their levels a year ago, according to the ANZ job ads series survey. The Sydney Morning Herald reports that job ads declined by 1.8% in June after a 2.5% fall in May.

“Job advertisements are now close to 30% below their most recent peak at the end of 2010 and just 8% higher than the lowest level reached during the global financial crisis,” ANZ reported.

Mining state Western Australia was the hardest hit, recording the sharpest trend decline among the states, with ads down by almost half from a year ago. In contrast, non-mining states New South Wales and South Australia recorded “more encouraging signs of moderation in the pace of decline,” ANZ said.

HSBC quits retail banking in S Korea

The South China Morning Post says HSBC will shut 10 of its 11 branches in South Korea and lay off 230 staff. This follows the sale of its insurance business in April. Standard Chartered has also raised concerns about consumer banking in South Korea, saying it had seen a decline in asset quality in the country and would reassess the value of its goodwill.

HSBC retains its global banking and markets business. 

Yen stifles yen for M&A

Japanese companies made the fewest acquisitions in a decade during the first half as the yen’s volatility climbed to a four-year high, cooling buying interest.

Bloomberg says the number of deals announced in the first half of 2013 came to 997, with a total value of USD$45.7 billion, the lowest number of deals and smallest value since the first six months of 2004. Total deal value is 47% lower than the first half of 2012.

Asia expansion for TIAA-Cref

The joint venture between New York-based asset manager TIAA-Cref and UK-based Henderson Global Investors, announced two weeks ago, is eyeing Asia for significant expansion, with initial investments planned in retail and office properties. The company says it plans to hire to support its growth drive in Asia, according to Financial News.

People moves

Standard Chartered has promoted Robert Mason to head of global high yield DCM while Peter Szekely moves to Singapore to head South East Asia DCM.

UK fund house Hermes says it plans to hire a regional head of sales and business development in Asia in the next three months.

Ramsay @£*%!&* loses on laksa 

Singapore’s famed food hawkers beat notoriously foul-mouthed UK chef Gordon Ramsay two out of three at the SingTel Hawker Heroes Challenge in the Lion City on the weekend. The Straits Times reports that Ramsay did manage one victory, taking first place for his version of famous Singaporean delicacy, chilli crab, but his laksa and his chicken rice were beaten by local chefs Ryan Koh and Madam Foo Kui Lian.

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