Wednesday, April 24, 2013

Financial Review: Steady Recovery in 2013 Q1

Global economy had been relatively stable with steady recovery in 2013 Q1 (first quarter) since 2012 Q3. Below checklist table is our exclusive summary of all crucial financial or business news in 2013 Q1 (January to March):

Jan. 1:Shanghai municipal government started to implement 38 regulations to build itself as an international trading centre for free trade zone (FTZ), platform trading as well as tax-free shopping zones. For more other Shanghai development plans, please read: Shanghai Development Plans.
Jan. 6:BCBS (Basel Committee of Bank Supervision) announced to delay implementation deadline of Basel III new capital adequacy rules from 2015 to 2019. Global commercial bankers will only need to comply with 60% minimum (was 100%) LCR (Liquidity Coverage Ratio) by 2015, and then gradually add 10% each year until 100% full implementation by 2019. Basel Committee also relaxed to accept RMBS (Retail Mortgage-Backed Securities) as accounting buffer for bank assets.
Jan. 11:(1) Japan Shinzo Abe Government approved an expenditure stimulus plan worth JPY 10.3 trillion to boost its weak economy.
(2) China CPI (Consumer Price Index) slowed down to only +2.6% YoY in 2012 (from +5.4% YoY in 2011), well within central government preset target level of +4%. Source: China CPI Target.
Jan. 14:China Securities Regulatory Commission (CSRC) Chairman, Guo Shuqing, explained in the 6th Asian Financial Forum that A-share markets can accommodate a new QFII 2 (Qualified Foreign Institutional Investors ver. 2) and RQFII 2 (RMB QFII ver. 2) with expansion of quotas 10 times larger than the current level. Guo also expected launching of a new QDII 2 (Qualified Domestic Institutional Investors ver. 2) within this year 2013 to allow Chinese domestic residents to invest in overseas equity markets. For more other RMB internationalization plan, please read: RMB Internationalization Plan.
Jan. 18:(1) China GDP (Gross Domestic Product) grew only by +7.8% YoY in 2012, the lowest annual economic growth rate since 1999. Source: China GDP Target. It was also the first time that the current increase trend of Chinese working-age population began to drop.
(2) The first fiber optic cross-strait communications cable directly linking two sides of Taiwan Strait finished construction and started linking between mainland China Fuzhou and Taiwan Tamsui.
Jan. 22:Japanese Yen gained as BoJ (Bank of Japan) announced to delay its open-ended asset purchase and monetary easing program worth JPY 13 trillion (JPY 10 trillion treasury discount bills, JPY 2 trillion long-term government bonds, JPY 1 trillion private debts) per month starting 2014. BoJ (Bank of Japan) also attempted to beat deflation by aggressively doubling its annual inflation target to +2% YoY (was only +1% YoY).
Jan. 23:India Government increased Gold import tax to 6% from 4%, in order to curb the strong domestic Gold demands.
Jan. 25:London West surpassed Hong Kong Central District by end-2012 as the most expensive office space location in the world.
Jan. 27:Shanghai announced to build a pilot free trade zone (FTZ) at Pudong New Area in 2013. For more other Shanghai news, please read: Shanghai Financial Centre.
Jan. 31:U.S. Congress approved to temporarily extend its debt ceiling suspension period for 3 more months until May 19.
Feb. 4:McGraw-Hill share price dropped significantly by over 13% as the U.S. Justice Department filed lawsuit against Standard & Poor's (S&P), claiming its fraud ratings for RMBS (Residential Mortgage-Based Securities) and CDO (Credit Default Swaps). Standard & Poor's (S&P) has been the only major credit rating agency that downgraded the U.S. sovereign debts from the top AAA (Triple-A) since the 2007 global financial crisis.
Feb. 6:(1) Taiwan officially began to act as a new offshore Renminbi (RMB) centre after Bank of China (Taipei Branch) became its regional RMB clearing bank as Taiwan local banks could start launching RMB-related products to their customers. For more other RMB banking business news, please read: RMB Banking Business.
(2) China 2012 annual gold production hit record high level of 403 tonnes, and thus remained as the largest gold producer in the world for 6 consecutive years.
Feb. 8:(1) Venezuela depreciated its Bolivar currency significantly by 32% to dilute its heavy debts borrowed by the government.
(2) PBoC (People's Bank of China) appointed ICBC (Industrial and Commercial Bank of China) as Yuan clearing bank officially in Singapore. Source: Offshore Yuan Centre in Singapore.
Feb. 9:China trading volume (sum of imports and exports) totaled USD$3.87 trillion and surpassed U.S. (USD$3.82 trillion only) to become the largest trading nation in the world. You may read also about China Trade Balance.
Feb. 12:North Korea Kim Jong-un Government conducted its third nuclear test against South Korea and the U.S. alliance.
Feb. 14:(1) Euro (EUR) declined amidst Eurozone went into deeper recession as its 2012 Q4 Quarter GDP dropped by 0.6% QoQ.
(2) American Airlines (owned by AMR) acquired and merged with U.S. Airways to become the largest airline in the world.
(3) 3G capital partnered with Warren Buffett's Berkshire Hathaway Inc to buy H.J. Heinz, the largest food industry acquisition ever.
Feb. 18:(1) Japan stock market sparked and Yen (JPY) continued to devaluate significantly as G20 kept silent on Japanese QE (quantitative easing) plans, thus encouraging Shinzo Abe government to print more money for supporting its exports. You may also read the similar Aggressive Quantitative Easing Policy in the U.S.
(2) Reader's Digest magazine went bankrupt with its mother company RDA Holding.
(3) Chinese stated-owned company, China Overseas Ports Holding (COPH) Ltd, replaced Singaporean company to take over operation control on a strategic Pakistan Gwadar seaport in Middle East region for safe gas and oil transportation from the Gulf.
Feb. 22:Moody's Investors Service (MIS) cut U.K. credit rating to Aa1 from the top Aaa on weak economic growth expectation, the first time U.K. lost its Triple-A rating since 1978.
Feb. 25:CME (Chicago Mercantile Exchange) began USD/CNH futures trading with Bank of China (Hong Kong Branch) appointed as its market maker. You may read also about CME RMB Business.
Feb. 28:China launched a new pilot scheme to allow securities re-lending business between local brokers for facilitating securities short selling and margin trading in A-share markets.
Mar. 1:(1) U.S. began automatic across-the-board government spending cut worth USD$1.2 trillion over the next 10 years as both Republicans and Democrats parties could not reach a compromised budget plan.
(2) Italy started to implement a new financial transactions tax (FTT) for equities trading as well as high-frequency trading transactions. This FTT (financial transactions tax) will then expand to cover derivative transactions from July 1, 2013.
Mar. 4:Switzerland people approved 'fat cat initiative' in a Swiss referendum to limit payouts of highly-paid executives.
Mar. 5:(1) U.S. Dow Jones Industrial Average (DJIA) rallied and hit record high level over 14253, the first time since October 2007.
(2) China Communist Party announced 2013 official GDP target as +7.5% YoY and 2013 official CPI target as +3.5% YoY in its annual Government Work Report (GWR). For our own economic targets, please read our 2013 GDP target as well as 2013 CPI target. You may also read the previous Chinese Government Work Report (GWR).
Mar. 6:China Securities Regulatory Commission (CSRC) announced a RQFII (Renminbi Qualified Foreign Institutional Investors) Program expansion to remove investment restrictions for Hong Kong registered offshore RQFII fund managers to invest directly in onshore asset markets including IPO (Initial Public Offerings), share placement, stock index futures, convertible bond sales, inter-bank bond market trades etc. Hong Long registered funds could also allocate 100% of their total assets in A-shares (was 20% in A-shares only and 80% in bonds). For the background of RQFII Policy, please read: RMB Internationalization.
Mar. 8:North Korea Pyongyang DPRK Government declared to void the 1953 Korean War ceasefire agreement and threatened a nuclear attack as United Nations (U.N.) security council approved new punishing sanctions against its recent nuclear test.
Mar. 10:China Communist Party implemented its largest government restructuring plan (called 'Big-Ministry System' for fewer but larger State Council ministries) since1998, such as initiating mergers to break down the Ministry of Railways (MoR).
Mar. 14:Xi Jingping became the Chairman of PRC (People's Republic of China) officially.
Mar. 16:Eurozone finance ministers suddenly proposed to impose a 9.9% deposit tax on Cyprus. This unprecedented tax just intended to force all Cypriot deposit holders to contribute their money for its proposed EUR 10 billion bailout plan.
Mar. 19:People's Bank of China (PBoC) published new rules for QFII (Qualified Foreign Institutional Investors) to invest in domestic inter-bank bond market. You may also read about other New QFII Policies.
Mar. 21:Standard & Poor's (S&P) cut Cyprus sovereign credit rating further into junk status to CCC on its worsen banking sector crisis.
Mar. 24:European Union (EU) and International Monetary Fund (IMF) finally agreed an EUR 10 billion Cyprus rescue plan that cancelled the previously-proposed deposit tax, but turned to penalize rich depositors heavily. Bank accounts with holding over EUR 100K would be frozen and these rich depositors would be forced to convert their deposits into bank shares. Cyprus had also to close down its second biggest bank for keeping Bank of Cyprus (BoC), its largest bank, alive through substantial restructuring.
Mar. 26:BRICS (Brazil, Russia, India, China, as well as South Africa) finance ministers proposed to set up a new BRICS development bank with funding about USD$100 billion, thus reducing their dependency on traditional Western financial powers such as International Monetary Fund (IMF) or World Bank.

As a warm reminder, the above 2013 Q1 financial review summary is purely an extension of our 2012 Q4 checklist table (Source: Financial Review 2012 Q4 (Fourth Quarter)). To find out all our previous financial review summaries for past years, please do not miss: Our Exclusive List of Quarterly Financial Reviews.

As a summary, global economy had undergone a period of steady recovery in 2013 Q1 (first quarter). On March, U.S. Dow Jones Industrial Average (DJIA) rallied and hit record high level over 14253, the first time since October 2007, although U.S. had to began automatic across-the-board government spending cut worth USD$1.2 trillion over the next 10 years as both Republicans and Democrats parties could not reach a compromised budget plan. Japan stock market, Nikkei 225, also sparked and Yen (JPY) continued to devaluate significantly during the same period. Thanks particularly to Ben Bernanke, chairman of the U.S. Federal Reserve, who has continuously driven Aggressive Quantitative Easing (QE) Policy. Do not forget BCBS (Basel Committee of Bank Supervision) that supported big international bankers by delaying implementation deadline of Basel III new capital adequacy rules from 2015 to 2019, and also thanks to G20 Group which ignored and kept silent on Japanese latest aggressive QE (quantitative easing) plans.


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