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Daily Dispatches – Back into the shadows

China’s commitment to staving off a more radical economic slowdown has had at least one undesirable consequence – the return of shadow banks, whose activities were muted by the authorities’ squeeze on liquidity.

According to a Bloomberg report, August lending came to 1.57 trillion yuan (US$257 billion), well over 50% more than the 950 billion yuan expected by analysts polled by Bloomberg. Of this amount, less than half came from traditional banks (down from 87% in July), signalling that shadow banks – informal lenders – had stepped up their activity again.

While the upside is that this will help keep economic momentum up, says Bloomberg, and ensure that the Chinese government is able to meet its growth targets, it also increases the element of financial risk from non-asset-backed lending.

Asia not headed for another 1997 financial crisis

Singapore’s Prime Minister Lee Hsien Loong says Asia is not on the verge of financial crisis, despite the recent turmoil in regional equity and currency markets, according to a report in the Business Times.

“I think the Asian economies are in a stronger position than they were in 1997 when the crisis came. I think we’ve got more safeguards instituted now over the last decade and a half since the Asian crisis to deal with the likely consequences of big capital flows.”

Reuters says that Malaysian Prime Minister Najib Razak plans to announce measures this week to boost the economic role of majority ethnic Malays, backtracking on earlier pledges to scale down affirmative action policies.

Affirmative action privileges were put in place to improve the lot of Malays, who make up around 60% of the 28 million population, and historically poorer and traditionally live in rural areas. Minority ethnic Chinese, about a quarter of the population, are wealthier and still dominate business and the economy.

Critics say the policy has mostly benefitted wealthy, well-connected Malays more than the poor majority, while also contributing to a massive “brain drain” of ethnic Chinese who leave Malaysia to seek opportunities elsewhere.

No such thing as a free lunch

Japan’s Securities and Exchange Surveillance Commission is currently investigating whether the local investment banking unit of Deutsche Bank violated compliance practices by excessive client entertainment, says the Wall Street Journal.

The SESC has yet to decide whether it will take action on the Deutsche Bank unit, such as issuing a business-improvement order, and the regulators may not hand out any punishment to the German bank at all.

Indonesia’s new US$1.5 billion sukuk

The country has just closed the largest single tranche sukuk from an Asia sovereign borrower and paid the largest coupon (a reflection of the risk) since 2009, according to Dealogic and reported by Finance Asia.

The country’s risk rating has deteriorated, resulting in capital flight from its markets. The current account has widened, and its currency has depreciated.

Indonesia’s latest funding round brings total capital raising to US$5.5 billion this year.

And the rich just keep getting richer

Fuelled by global recovery in the equity and real estate markets, the investable wealth of the world’s high net worth individuals (HNWIs) rebounded in 2012, according to the latest edition of the World Wealth Report and reported by International Adviser.

HNWI’s wealth advanced 10% last year to reach a record high of $46.2 trillion. One million individuals joined the global HNWI population last year, bringing it to 12 million.

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