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Daily Dispatches – Stimulus woes hit Singapore stocks worst

merrygoround

Singapore stocks have dropped the most among developed markets in the past month, following a major outflow of cash from South East Asia on worries that the US Federal Reserve will slow its easy money programme in that country, according to a news report by Bloomberg this morning.

Investors withdrew US$2.2 billion from Thailand, Indonesia and the Philippines in August, partially reversing inflows of US$6.8 billion in 2012, according to Bloomberg data.

Singapore’s Straits Times Index, the benchmark gauge for the region’s biggest market, dropped 7.5% in the 10 days to the end of last week, marking its longest losing streak since 2002, and dropped 6% overall in August, making it the worst performer in the world’s developed equity markets.  

Stocks in South East Asia sank faster than global equities on signs regional economic growth is slowing and as the Fed prepares to cut back on bond buying – its chosen method to pump up the US economy.

But there is a silver lining, says the Financial Times, with convertible bonds proving an option for Asian companies looking to raise capital even as share values decline.  

Qihoo 360 Technology, a US-listed Chinese security software firm, saw very strong demand for one of the year’s biggest issues last week. That US$600 million deal took total issuance for the year so far in Asia excluding Japan to above US$10 billion, according to Dealogic.

If a $400m deal from Taiwanese semiconductor group ASE prices this week as expected, the Financial Times says the market will match the total issuance in 2012.

Convertible bonds allow companies to cut the cost of borrowing money in the bond markets because they include an option for bondholders to buy shares at a certain price when the bond matures. When stock market volatility is high, the value of that option is increased, which means companies can pay less in cash interest than they would with a straight bond.

Saines says cheerio to CBA

Businessweek reports that Ian Saines, head of institutional banking and markets at Commonwealth Bank of Australia, the country’s largest lender by market value, will leave at the end of 2013. CBA will begin a global search to replace him.

Saines joined CBA in 2004 and was promoted to head the institutional banking and markets unit in March 2009. It is not clear where Saines is headed.

CBA’s institutional and markets business contributed 16% of CBA’s cash profit in the year ended June 30. 

Black days ahead for Everbright IPO

The Standard in Hong Kong says that China Everbright Bank’s H-share initial public offering is expected to face tougher scrutiny after its associate Everbright Securities was ordered to pay a record HK$663.33 million fine by mainland regulators who said a trading mistake was actually insider trading.

The bank is hoping to raise HK$31 billion in Hong Kong this month – its third attempt at a new listing since 2011.

The lender is in urgent need of new funds as it has not met a new regulatory requirement of 8.5% capital adequacy. Analysts suggest that the IPO may be delayed again, adding that even if the bank sticks to its original timetable, the market response is expected to be cold.

China Life and AMP Capital clinch JV

China Life Insurance Co., the nation’s largest insurer, and a unit of Australia’s AMP Ltd have announced a funds management joint venture targeting Chinese retail and institutional investors, according to a Bloomberg report.

AMP Capital, which managed US$116 billion as at March 31, holds a 15% interest in China Life AMP Asset Management.The joint venture, which has received approval from the China Insurance Regulatory Commission, will be China Life’s first in mainland China with a foreign partner in funds management.

UOB warns of Thai financial crisis

Singapore’s United Overseas Bank says consumer leverage is building up in Thailand in housing, car loans and personal credit cards, and if banks are not careful, this could be at the root of a downturn in next year’s economic growth.

Asian Banking & Finance reports that In the first quarter, Thailand’s household debt jumped to US$123 billion or 77.5% of gross domestic product compared with US$42 billion or 28.8% during the 1997 crisis.

UOB believes the next crisis in Asia will be one of consumer overlap. Corporate indebtedness was the main cause of the 1997 Asian financial crisis; bank’s being over leveraged resulted in the 2008 US subprime crisis and public borrowing excesses caused the 2012 European sovereign debt crisis.

UOB warns that this is not just Thailand’s problem: high property prices are the result of consumer leverage in China and Singapore too, it maintains.

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