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Daily Dispatches – Emerging nouveau riches

Institutions betting on the rise of a new wealthy class in emerging markets will be reassured by new research released today by the Scorpio Partnership, and reported in Asian Investor.

In 2012, wealth managers saw a dramatic swing in inflows of new money, with a rise of 23.7% in net new inflows to USD$18.5 trillion compared to a gut-wrenching 27.9% plunge in 2011. Assets grew an average 8.7% in 2012, compared to only 0.7% in 2011, and Scorpio says that the bulk of the action is taking place in emerging markets.

According to the global breakdown of booked assets, 28% was in Latin America, 21% in the Asia-Pacific region, only 2% in the Middle East and Africa, while the rest – 49% – was in Europe and the US. This indicates, says Scorpio, that wealth creation and wealth management is shifting to emerging markets.

Interestingly, many of the nouveau riche say they are increasingly inclined to want a single-bank solution, with four out of ten opting for one wealth manager, compared to 14% who are multi-banked.

The research also pointed to the growing dominance of the world’s largest global banks in the private banking market. Together, the top 20 by assets under management (AUM) now manage three quarters of the industry’s total AUM.

The top ten by AUM are UBS; Bank of America Merrill Lynch; Wells Fargo; Morgan Stanley; Credit Suisse; Royal Bank of Canada; HSBC; Deutsche Bank; BNP Paribas and Pictet.

Dimmer outlook

The Wall Street Journal reports that the International Monetary Fund has cut its global growth outlook for this year and next, saying the prospect of the Federal Reserve unwinding quantitative easing is aggravating a slowdown in emerging markets.

The IMF cut its growth forecast for this year and next by a fifth of one percentage point from its last assessment in April. It now expects 2013 growth at 3.1% and 2014 output at 3.8%.

Banker cons to convicts

British finance minister George Osborne says he will jail reckless bankers, in line with proposals released last month by the Parliamentary Commission on Banking Standards to punish those who are responsible for irresponsible behaviour. Key aspects of the PCBS will be added to the banking reform bill currently in Parliament, reports the South China Morning Post.

The latest news follows months and years of anger at the financial crisis that the British public believes was caused by shoddy management by bosses who walked away from the collapses of their banks with cushy pensions. The rage against the ‘banksters’ has been further fuelled by the details emerging about the mis-selling of insurance products, brilliantly outlined in an article by John Lanchester in the London Review of Books.

The threat of a jail term might add further impetus to the number of British bankers keen to ply their trade in other markets, such as Asia. And currently, the regime in Singapore, which is increasingly establishing itself as a financial hub, may seem less draconian, despite the Lion City’s reputation for being strict.

This week the Monetary Authority of Singapore said it was not able to censure banks operating in the city for attempts to rig the interbank lending interest rate, even though other banks had been fined hundreds of millions of dollars by UK and US regulators for the same activity.

The Business Times reports that MAS board member Lawrence Wong told Singapore’s parliament that MAS was not able to impose a specific fine. “We do not regulate rate-setting activities today. Neither do many other jurisdictions.” Over 130 traders in Singapore were forced out of jobs as a result of the scandal.

No.1 Son

The best CEO in China is Hong Qi, CEO of China Minsheng Bank, according to the Forbes 2013 ranking of the country’s best CEOs. The ranking is based on the financial performance of the company managed by CEOs, as well as market value and CEO pay.

People’s Daily reports that Hong Qi, who is 56, earned USD$870 500 last year. The average annual salary of 2013’s best CEOs was just over a million US dollars, lower than 2012 average of USD$1.2 million. The average age of the top CEOs is 52 in 2013, older than the average of 42 of last year.

Great expectations

Money Control reports that most Asia Pacific-based chief financial officers expect growth in revenues and profits at their corporations this year.

Nearly three quarters of those polled are forecasting year-on-year revenue growth in 2013, while 62% anticipate that their 2013 net profits will exceed those of 2012, according to the Bank of America Merrill Lynch 2013 CFO Outlook Asia survey of  600 CFOs and senior finance executives in the region.

Shorting the Big Four

Australia’s banking giants may no longer be the darlings of the investment world, with the Sydney Morning Herald reporting that hedge funds are betting that the share prices of the banks are poised for a fall.

The proportion of investors with short’ positions against the big four has risen from long-term lows as foreign investors turn away from Australian banking stocks following a sharp fall in the Aussie dollar, which has weakened the foreign currency value of Australian shares.

The banks most exposed to the trend are those with the biggest mortgage books; Commonwealth Bank and Westpac.

Faster than a speeding bullet – and cheaper too

Planes are taking on trains in Japan, as budget airlines force rail operators to cut prices in order to compete.

Bloomberg reports that the price of some bullet train tickets have been reduced by 34% in the face of a growing threat from Peach Aviation, which is planning to start flying new routes to compete with the trains. Peach is offering fares from just under 4,000 yen, less than a third of a USD$140 ticket to travel by rail between Osaka and Kagoshima.

West Japan Railway, known as JR West, predicts profit will drop 4.5%t to 57.5 billion yen in the year ending March, even as it forecast sales will rise 0.9% to 1.31 trillion yen.

Central Japan Railway Co. (9022), the biggest bullet-train company, may also face competition from Peach, which plans to add flights in October between Tokyo and Osaka.

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