News Summary

When they say it is near 7%, it will be very near 7%!

Hello from Hong Kong!
On Saturday, representatives of the 57 founding countries
gathered in Beijing for the Asian Infrastructure Investment
Bank (AIIB) opening ceremony. At the gathering, Chinese
Premier Li Keqiang said Chinas economy grew nearly 7% last
year, with employment and household income holding up
despite weaker domestic and global demand. Li said in
absolute terms the Chinese economy grew by more in 2015
than the year before, and it is still one of the worlds
fastest-growing major economies. The government is due to
release official data for the Q4 and all of 2015 on Tuesday.
Market is expecting annual growth of 6.8%. Chinas annual
growth rate in 2014 was 7.3% (page 10).
Jim ONeil writes in The Sunday Times and tells his followers
not to panic, China is just growing up. In his piece, Chinas
economy is going through a necessary and complex structural
reform, and recent volatility should not obscure the progress
that has been made. Following the recent decision of the
IMF to allow the renminbi to be part of the SDR, the
currency is simply going to be a bit less predictable than it
has been the past decade. To describe renminbis fall as
devaluation is misleading and unhelpful to world markets!
(See page 11)
Xiao Gang, head of China Securities Regulatory Commission,
said China's capital market will open wider to foreign
investors in 2016 and domestic brokerages will expand
business overseas. The regulator said China will gradually
increase the quota for Qualified Foreign Institutional
Investors (QFII) and RMB QFII (page 11).
The Bank of Korea said South Korea's macroeconomic
uncertainty touched a three-year high in late 2015 as the
Fed Res interest rate hike and China's economic slowdown
have shaken financial markets across the world (page 11).
Taiwan has elected a female President. Tsai Ing-wen leads
the Democratic Progressive Party (DPP) that wants
independence from China. In her victory speech, she vowed
to preserve the status quo in relations with China, adding
Beijing must respect Taiwan's democracy and both sides must
ensure there are no provocations. According to The Sunday
Times, the final push in Tsais favour came in a furore just
before election day over Chou Tzuyu, a 16-year-old
Taiwanese singer for a South Korean girl band, who was
forced to apologise for holding a Taiwan flag on a television
show (page 2).

But in the Sunday Telegraph, economists have warned that

tumbling oil prices will force Britains manufacturers to cut
back on investment, as the sector is stuck in a deepening
recession. An EEF survey revealed that more than 20pc of
manufacturers have said they intend to slash investment
spending if oil drops to $20, while less than 15pc intended to
raise capital expenditure if crude falls to those levels (page
6).
Irwin Stelzer wrote in The Sunday Times that optimists said
US growth will struggle to reach a flaccid 2% this year.
Manufacturing, already in recession, will be hard hit by a
strong dollar, kept aloft by its safe-haven status and efforts
by China and the European Central Bank to weaken the Yuan
and Euro. However, America is still the best house in a bad
neighbourhood. He said the Fed might want to do something
to stimulate growth and weaken the dollar, but it is moving
in the opposite direction, with further interest-rate
increases scheduled for March, unless signals of trouble
force a pause (page 8).
In The WSJ, stocks sinking as the dollar rises, the Chinese
economy faltering, oil prices collapsing and US growth
showing signs of a slowdown, some are questioning whether
the Federal Reserve Bank misjudged the ability of the
economy and markets to withstand rising rates and whether
the Fed will stay the course. Investors have begun to wager
that the Fed will prove hesitant to move rates this year,
despite repeated comments from various Fed officials that
they are sticking to their course. The Dec fed-funds futures
contract is priced at a level that implies an 82% chance the
Fed will raise interest rates one time this year, down from
close to 100% just a few weeks ago (page 9).
In CIBC The Week Ahead, the main focus will be on Bank of
Canadas rate decision on January 20, not only in terms of a
possible rate cut, but also in a downwardly revised forecast
in the MPR. Avery Shenfeld wrote a weak Canadian dollar is a
painful but necessary ingredient to right Canadas ship in the
face of a massive shock to our terms of trade. But how
weak, and how fast is the question. Our analysis suggests
that a 70-cent loonie would already be soft enough to
position both non-resource goods and services exporters to
win back market share shed to the US in the prior decade.
http://research.cibcwm.com/economic_public/download/ja
n15_16.pdf

International sanctions on Iran have been lifted after a

watchdog confirmed it had complied with a deal designed to
prevent it developing nuclear weapons. This will unfreeze
billions of dollars of assets and allow Iran's oil to be sold
internationally (page 3).
The EY Item Club to be published on Monday will say that
Britain will grow faster this year in spite of the global
market turmoil that has wiped 110bn off the value of public
companies so far this month. It expects 2.6% growth this
year versus 2.2% last year. Item predicts a 2.8% increase in
consumer spending as a result of low inflation and the
chancellors decision in his autumn statement to postpone
cuts in tax credits (page 6).
These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

World News
Tsai Ing-wen elected Taiwan's first female
president
Taken from the BBC Saturday, 16 January 2016

Tsai Ing-wen has been elected Taiwan's first female

president.
Ms Tsai, 59, leads the Democratic Progressive Party (DPP)
that wants independence from China.
In her victory speech, she vowed to preserve the status quo
in relations with China, adding Beijing must respect Taiwan's
democracy and both sides must ensure there are no
provocations.
China sees the island as a breakaway province - which it has
threatened to take back by force if necessary.
In her speech, Ms Tsai hailed a "new era" in Taiwan and
pledged to co-operate with other political parties on major
issues.
The will of the Taiwanese people would be the basis for
relations with China's Ms Tsai said, urging both sides to show
"dignity and reciprocity" in their relations.
She thanked the US and Japan for their support and vowed
Taiwan would contribute to peace and stability in the region.
Ms Tsai had a commanding lead in the vote count when Eric
Chu of the ruling Kuomintang (KMT) admitted defeat.
Mr Chu congratulated Tsai Ing-wen and announced he was
quitting as KMT head. Taiwan's Premier Mao Chi-kuo also
resigned.
The election came just months after a historic meeting
between the leaders of Taiwan and China.
However, the flagging economy as well as Taiwan's
relationship with China both played a role in the voters'
choice, correspondents say.
The KMT has been in power for most of the past 70 years and
has overseen improved relations with Beijing - Ms Tsai's
victory means this is only the second-ever victory for the
DPP.
The first was by pro-independence advocate Chen Shui-bian
- during his time as president between 2000 and 2008
tensions escalated with China.
The election result marks a turning point in Taiwan's
democracy and relationship with China.
The DPP win means the island is moving towards a political
system in which voters prefer to transfer power from one
party to another, ending decades of mostly KMT rule.
That could make relations with China uncertain, because
unlike the KMT, the DPP favours Taiwan's independence and
does not recognise the Republic of China (Taiwan's official
name) and the People's Republic of China as part of "one
China".
The KMT was the Communists' bitter enemy during the civil
war. It fled to Taiwan after losing the civil war and its
charter and leaders still favour eventual unification. It
remains China's best hope - and perhaps only hope - of
peacefully reunifying with Taiwan
Beijing has been closely watching the elections to gauge
Taiwanese people's sentiments and what those sentiments
will mean for its goal of reunifying with the last inhabited
territory - following Hong Kong and Macau - that it feels was
unfairly snatched from it by Japan as a colony in 1895, and
then ruled separately by the KMT after the civil war.
Ms Tsai, a former scholar, has said she wants to "maintain
[the] status quo" with China.
She became chairwoman of the DPP in 2008, after it saw a
string of corruption scandals.
She lost a presidential bid in 2012 but has subsequently led
the party to regional election victories. She has won

increased support from the public partly because of

widespread dissatisfaction over the KMT and President Ma
Ying-jeou's handling of the economy and widening wealth
gap.
Saturday's polls come after a historic meeting between
President Ma and Chinese President Xi Jinping in Singapore in
November for talks that were seen as largely symbolic - the
first in more than 60 years.
Eric Chu, 54, is the mayor of New Taipei City and stepped up
to become chairman of the party in October.
The KMT is at risk of losing its majority in the legislature for
the first time in history.
The former accounting professor was seen as popular with
young people in the party, but had been unable to change
public opinion that is increasingly unhappy with the party's
friendly stance towards China and the island's economic
travails.
In 2014, hundreds of students occupied the parliament in the
largest show of anti-Chinese sentiment on the island for
years. Labelled the Sunflower Movement, protesters
demanded more transparency in trade pacts negotiated with
China.
Taiwan for all practical purposes been independent since the
end of the Chinese civil war in 1949, when the defeated
Nationalist government fled to the island as the Communists,
under Mao Zedong, swept to power.
(Full article click - BBC)
---

Taiwan vote angers Chinese dragon

Taken from the Sunday Times 17 January 2016

TAIWAN elected a sharp critic of the Chinese government as

its first female president yesterday in a vote that deepened
the divisions between the island democracy of 23m people
and its giant authoritarian neighbour.
Tsai Ing-wen, of the Democratic Progressive party (DPP),
defeated her main rival in the presidential race by a margin
of almost two to one. Her party was also set to win control
of parliament.
Our message to the world is that democracy is deeply
embedded in the Taiwanese people, said Tsai, 59, in a
victory speech that singled out America and Japan with
thanks for their support words that will enrage China.
Her supporters celebrated and her opponents mourned in a
cacophony of live coverage by Taiwans free media, an
election spectacle unknown to the 1.2bn people of mainland
China.
Tsai, a long-serving bureaucrat who has a PhD in law from
the London School of Economics, has revived the fortunes of
the DPP.
Shes serious cool, said Andy Chan, 21, a student voting for
the first time yesterday.
She routed the candidate of the nationalist Kuomintang
(KMT), Eric Chu, 54, whose personal popularity was unable
to beat public disillusion with the party that ruled Taiwan for
decades.
A final push in Tsais favour came in a furore just before
election day over Chou Tzuyu, a 16-year-old Taiwanese
singer for a South Korean girl band, who was forced to
apologise for holding a Taiwan flag on a television show.
Local media reports said the Chinese telecommunications
firm Huawei, which has a large UK operation, warned its
South Korean partner to drop all sponsorship endorsements
of Chou because she was a pro-independence activist.
The teenagers forlorn apology on video may have mobilised
DPP voters because the party officially stands for an
independent Taiwan.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

In practice, Tsai says she will observe the status quo,

supported by most Taiwanese, of neither independence from
nor unification with China.
In the end the election was a clash of styles and generations,
visible at the final rallies in the dreary rain of Friday night.
Tsais rally was full of young couples and T-shirted students
roused by pop singers and veteran activists. A green-tinged
light show illuminated the tower of the presidential office
nearby.
In contrast, a well-drilled KMT party machine carried off a
slick event for her rival, Chu, with ranks of middle-aged
women waving flags and huddled in identical rainproof
plastic macs, entertained by singers and dancers suitable for
an afternoon television show.
Ma Ying-jeou, the incumbent president, who is also from the
KMT, took the stage to defend his record. We have acted
for history, he said. Ma then bowed deeply to the audience
in a humble plea for votes.
Mas grand political gesture a historic meeting with the
Chinese president, Xi Jinping, in Singapore last year did
not pay off. Instead it alienated voters increasingly worried
by Beijings hardline policies.
Among the most popular faces at rallies and campaign
events last week were a group of students and democracy
activists from Hong Kong.
We are here to learn about the practice of democracy,
said Joshua Wong, leader of the Scholarism movement that
spearheaded mass demonstrations in the former British
colony in 2014.
China refused to allow the 7.2m people of Hong Kong a free
vote next year on deciding who will lead the city, insisting
candidates must be vetted by a pro-Beijing committee.
An uproar in Hong Kong over the disappearance of five
dissident booksellers who are believed to be in the hands of
the Chinese security services has also had a huge impact on
public opinion here.
Taiwan has ruled itself since the Chinese civil war when the
KMT, then led by Chiang Kai-shek, fled to the island in 1949.
His son, Ching-kuo, lifted martial law in the late 1980s,
paving the way for todays freedom.
It is not a perfect democracy, if such a creature exists, but
it is one that is embraced with more passion and
commitment by its citizenry with every passing year, said
the Taipei Times newspaper in an editorial on election day.
(Full article click - Times)
---

Iran nuclear deal: International sanctions lifted

Taken from the BBC News Sunday, 17 January 2016

International sanctions on Iran have been lifted after a

watchdog confirmed it had complied with a deal designed to
prevent it developing nuclear weapons.
The EU foreign policy chief, Federica Mogherini, said the
deal would contribute to improved regional and
international peace and security.
The landmark deal between Iran and world powers was
agreed last July.
Lifting the sanctions will unfreeze billions of dollars of assets
and allow Iran's oil to be sold internationally.
The international nuclear watchdog, the IAEA, said its
inspectors had verified that Tehran had taken the required
steps.
As part of the deal, Iran had to drastically reduce its number
of centrifuges and dismantle a heavy-water reactor near the
town of Arak, both of which could be used in creating
nuclear weapons.
Iran has always maintained its nuclear programme is
peaceful, but opponents of the deal - such as some US

Republicans - say it does not do enough to ensure the

country cannot develop a nuclear bomb.
The US Secretary of State John Kerry has ordered that US
nuclear-related economic sanctions against Iran be lifted.
Speaking in Vienna where he had been holding talks with his
Iranian counterpart, Mr Kerry said Iran had "undertaken
significant steps" which many people "doubted would ever
come to pass".
The response
"Today, as a result of the actions taken since last July, the
United States, our friends and allies in the Middle East, in
the entire world are safer because the threat of a nuclear
weapon has been reduced" - US Secretary of State John Kerry
"Even after signing the nuclear deal, Iran has not
relinquished its ambition to obtain nuclear weapons, and
continues to act to destabilise the Middle East and spread
terror throughout the world while violating its international
commitments" - Israeli Prime Minister Benjamin Netanyahu
"Today, the Obama administration will begin lifting economic
sanctions on the world's leading state sponsor of terrorism" US Republican House Speaker Paul Ryan in a statement
"Years of patient and persistent diplomacy, and difficult
technical work, have borne fruit as we now implement the
deal" - British Foreign Secretary Philip Hammond
Earlier on Saturday it emerged that Iran had released
Washington Post reporter Jason Rezaian and three other
Iranian-American prisoners in an apparent prisoner swap
with the United States.
Rezaian, 39, was jailed on charges, including espionage, last
November.
The US said it was offering clemency to seven Iranians being
held in the US for sanctions violation.
Mr Kerry said said he was "very happy to say that as we speak
five Americans have been released from custody and they
should be on their way home to their families shortly".
A fifth American, Matthew Trevithick, was also released on
Saturday.
President Barack Obama would give more details of the
releases later, Mr Kerry said.
The IAEA said it had installed a device at the Natanz plant to
monitor Iran's uranium enrichment activities in real time, in
order to verify that uranium enrichment levels were kept at
up to 3.67% as agreed in the deal with world powers.
The organisation's head, Yukiya Amano, is to visit Tehran on
Sunday for meetings with President Rouhani and other
officials.
What is the nuclear deal?
In July 2015, Iran agreed a landmark nuclear deal with six
world powers to limit its sensitive nuclear activities for more
than a decade in return for the lifting of crippling sanctions.
The US is confident the agreement will prevent Iran from
obtaining a nuclear weapon. Iran says it has the right to
nuclear energy - and stresses that its nuclear programme is
for peaceful purposes only.
What does Iran stand to gain?
The sanctions have cost Iran more than more than $160bn
(102bn) in oil revenue since 2012 alone. Once they are
lifted, the country will be able to resume selling oil on
international markets and using the global financial system
for trade. Iran has the fourth largest oil reserves in the
world and the energy industry is braced for lower prices.
Iran will also be able to access more than $100bn in assets
frozen overseas.
(Full article click - BBC)
---

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Don't fear the oil price crash - unless it heralds

the beginning of a global downturn
Taken from the Sunday Telegraph 17 January 2016

Cheaper oil should provide a massive stimulus to the global

economy, unless the commodity is getting cheaper for the
wrong reasons
No one watching the past weeks oil price moves could be
more smug than a Scottish unionist. As the price of Brent has
plunged, many will be glad that Scotland did not decide to
go it alone.
Economic predictions by the Scottish government formed the
backbone of the case for independence. They rested on the
assumption that a barrel of crude would fetch $110, which it
had in the summer of 2014. The commoditys price has since
crumbled, falling below $30 over the past week.
Nicola Sturgeon, Scotlands First Minister and SNP leader, has
admitted the party got it wrong. If Scotland was now an
independent economy, it would be facing the same kind of
fiscal threat as many oil-exporting nations.
Already, the Scottish economy has begun to reel. GDP grew
just 0.1pc in the third quarter of last year, against growth of
0.4pc across the UK as a whole, according to the latest
figures.
However, Sturgeon noted that, while the Scottish
governments predictions came undone, so too did those of
practically other forecaster.
When the SNP was talking about $110 a barrel, the UK
Governments Department of Energy and Climate Change had
pencilled in a price above $120. Everybodys projections
about oil were wrong, Sturgeon concluded.
Forecasting oils movements is notoriously difficult, but it is
a variable that cannot be ignored. Its recent moves have
already reverberated through financial markets, driving
stock and bond prices. Changes in the price of oil will force
governments to reassess their spending plans, and central
banks to re-examine their plans for interest rates.
There has been a competitive cacophony from the largest
investment banks since the start of 2016, as barely a day has
gone by without cuts to oil price forecasts by some research
house or another. These bearish views on the oil market
appear as close to unanimity as any we can recall, says
Neil Mellor, a BNY Mellon strategist.
By the end of last week, Standard Chartered had the most
extreme prediction. The emerging market-focused bank
believes crude could trade at $10. Prices could fall further as
investors assume US shale production will be resilient in the
face of price movements, analysts said. In the extreme
case, the only definition of a floor would come when the
entire market felt that prices had undershot too far.
Like other commodities, supply and demand drive what price
crude will fetch on global markets. The emergence of the US
as an oil producing powerhouse has been pivotal in
prompting the slide.
Staff at the European Central Bank (ECB) have calculated
that rising supply has been the dominant force in pushing
down prices. As the US has switched on fracking technology
to get oil out of the ground, global production has exploded.
The grip of the Organisation of Petroleum Exporting
Countries (Opec), the oil cartel, has loosened accordingly. At
its most recent meeting, members failed to agree on a new
production ceiling.
The International Energy Agency (IEA) estimates that global
oil production stood at 96.9m barrels a day in the third
quarter of last year. In that period, it believes there was
demand for just 95.4m barrels a day.
Iraq has made plans to export a record 3.63m barrels per day
next month, and while US supply growth may be slowing, it
remains near 45-year highs. Iranian production is soon

expected to add to the mayhem, flooding an extra 730,000

barrels a day on to already oversupplied markets.
Economists say lower oil prices are, for the global economy,
a positive thing. Cheap energy acts as an effective tax cut,
they say, reducing fuel costs and utility bills. In turn, the
budgets of households and firms are looser, buoying spending
and investment.
However, if the oil rout is a mere precursor to a downturn in
the global economy, all bets could be off. The demand side
of the equation has done little to prop up prices. Fears over
the Chinese economy have fed into wider concerns about the
health of emerging markets and the global economy. Lower
growth inevitably means less demand for oil as an input for
production.
It is this latter factor that has greater potential to unnerve.
If the driver of oil price falls has been the strength of the
global economy, then things may become much worse before
they get better.
Weak oil prices could lead to falling net exports, causing
businesses to cut investment, and forcing inflation lower.
This blunts the growth-bolstering effect of lower
commodity prices, said Mario Draghi, the ECB's President.
Even if demand is not to be blamed, a succession of supply
shocks could have a similar effect. Enough of them can occur
so that inflation is low for so long that it causes firms and
households to revise down inflation expectations. The
effect of supply shocks becomes more similar to demand
shocks, Draghi added.
On the frontlines of the oil slump are the commoditys
producers. Those especially reliant on oil for revenues have
suffered since the rout began in the summer of 2014. Things
have become even worse for these exporters in recent
months, as the second wave of the oil sell-off began.
The most prominent victims have included Russia, as well as
many Gulf and Latin American states. A substantial number
have failed to develop other parts of their economies,
instead relying on oil for prosperity.
Their struggles can be characterised as a kind of resources
curse, as governments made rich by rent extraction have
lacked the drive to implement the right policies to shore up
economies against a potential collapse in prices. These
leaders must now reckon with their failure to prepare.
Perhaps it comes as no surprise that they have already hit
out at the West. Vladimir Putin, Russias president, has
suggested a conspiracy, that the crude slump has been
engineered by political forces. The obvious reason for the
decline in global oil prices is the slowdown in the rate of
[global] economic growth which means consumption is being
reduced in a whole range of countries, he said as the selloff became apparent in 2014.
A political component is always present in oil prices.
Furthermore, at some moments of crisis it starts to feel like
it is the politics that prevails in the pricing of energy
resources, he added. It is estimated the total cost to oil
exporting countries like Putins could exceed $2trillion (1.4
trillion).
Yet even for the oil importing nations, which make up the
majority of global GDP, the fall in oil prices can be a mixed
blessing. While for many manufacturers cheaper energy
means lower costs and greater profitability, the sector as a
whole has been beaten down along with oil prices.
In the US especially, the industrial side of the economy is at
risk, as lower prices feed through into capital expenditure
cuts. Energys share of capital expenditure has already fallen
from 10pc to 5pc. The good news is that it is unlikely to fall
further.
One of the best pieces of investment advice I have heard is
to buy when the news is the worst, says Torsten Slok,

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Deutsche Banks chief international economist. Energys

share of investment can only fall five percentage points
more before we get to zero, and getting to zero would be
unprecedented.
Rather than causing an economic crisis, the worst of the oil
price slump may already be over. The depressant effects of
falling commodity prices hit hard and fast. Their positive
impact almost always takes longer to trickle through the
economy. We may now be seeing that inflection point in the
West.
We are likely to see downward pressure on GDP from the
energy sector over the coming quarter or two but we now
have the worst behind us in terms of the negative impact of
falling oil prices on the economy, says Slok.
Dario Perkins, an economist at Lombard Street Research,
says the spillovers from US shale to the wider economy have
been nowhere near as gruesome as some commentators
were warned. Rather, lower energy prices have provided a
significant boost to consumers, he says, noting buoyant
car sales in the US and Europe.
If cheaper oil does not hurt the overall economy, it will
certainly cause no small amount of distress for those worst
hit. But this is small scale. Central bankers will be more
worried that the dynamics driving oil could change.
Unless oil prices bounce back, there will be more questions.
Could the oil stimulant become a poison? Policymakers will
be on the lookout for signs of weaker demand, or indications
that individually innocuous increases in the supply might
metastasise, permanently reducing peoples inflation
expectations.
Almost as many analysts convinced that oil will fall further
forecast that it will climb back by the end of the year,
reflecting a firming of growth.
The oil market has already dictated the dynamics of the
global economy for much of the past two years. Its price is
likely to serve as a barometer for the worlds health for a
while to come.
(Full article click - Telegraph)

European News
Bailout review process may be delayed
Taken from the Kathimerini Saturday, 16 January 2016

It appears that the representatives of Greeces creditors may

not arrive in Athens on Monday after all as they have just
requested additional data on the 2016 state budget, making
it rather unlikely that Finance Minister Euclid Tsakalotoss
statement this week that the review will be concluded
within four weeks, or by the end of February at the latest,
will prove correct.
The governments objective is to see the negotiations
through quickly. However, the signs from the creditors are
that it will be very difficult for this first formal review of the
bailout program to be completed anytime soon. The first big
issue is the social security reform and the second, which is
potentially more problematic, is the coverage of the fiscal
gap with new measures.
The fiscal gap is a major bone of contention for Athens and
its creditors, as the government expects the budget to
perform better than officially forecast, leading to a small
primary surplus from 2015, while the institutions believe
there is a gap that ought to be plugged with new measures
during the course of this year.
The European authorities have calculated the fiscal gap for
this year at around 900 million euros, while the International
Monetary Fund puts it at 1.8 billion, or 1 percent of gross
domestic product.
The Finance Ministry foresees a 1.9-billion-euro surplus in
last years revenues, with tax revenues alone beating their
target by 700 million, according to ministry officials. They
stress that most of the extra revenues have come by way of
permanent measures such as the value-added tax, meaning
that they will also have a positive impact on the budgets of
the following years, starting from 2016. In this context the
ministry expects 2015 to have ended with a small primary
surplus, at around 0.25 percent of GDP, which would also
improve the picture of the following budgets.
If the creditors also acknowledge that the fiscal gap is
smaller than what was anticipated, then no additional fiscal
measures will be required, said a ministry source, showing
the strategy of the Greek side in the talks. Should the two
sides agree on that, then it will be much easier to agree on
the updated midterm fiscal program for 2017 and 2018.
(Full article click - Kathimerini)
---

EU threat to 10bn O2 mobile takeover

Taken from the Sunday Times 17 January 2016

Hutchison may be forced to sell part of network to push

through Three deal
THE 10bn takeover of O2 by Three is under growing threat
as Brussels draws up stringent curbs on the new mobile giant
that will be created.
Later this month Europes competition watchdog will publish
a list of concerns about the deal, which will create Britains
largest mobile phone operator.
The statement of objections will spell out the European
Commissions fears, which will have to be addressed by
Threes owner, Hutchison Whampoa, before approval is
granted.
The Hong Kong conglomerate, controlled by tycoon Li Kashing, will have until the middle of April to persuade the
commission that reducing the number of network operators
from four to three would not disadvantage UK consumers.
Margrethe Vestager, the competition commissioner, has
taken a tough stance on such mergers. Last year, a deal
between the second and third-biggest mobile operators in
These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Denmark, where she was previously deputy prime minister,

collapsed after she demanded tough remedies to protect
customers.
Telecoms chiefs argue that tie-ups are necessary to
guarantee costly upgrades to networks, which face a
capacity crunch because of rampant growth in mobile
internet use. However, this month, Vestager stated that it
was difficult to find evidence that consolidation brings
more investment to the industry. What we see is that the
shareholders get the benefits, not the clients, she said.
Last week the commissioner held talks with the head of the
British telecoms watchdog Ofcom. Sharon White has openly
criticised Threes takeover of O2, which is owned by Spains
Telefonica. The combined company would control about 40%
of the British market.
Vestager the inspiration for the protagonist in the Danish
political drama Borgen is understood to be demanding that
Hutchison sell part of its network to a new entrant to
maintain a fourth big player. Hutchison is fiercely resisting,
on the grounds that it could potentially lose billions of
pounds on its huge investment in its British business.
Hutchison will argue that consumers have nothing to fear.
Deals in Ireland, Germany and Austria have not led to higher
bills, it told an investor conference last week.
In its submission to Brussels, it will say that Britain has a
comparatively large number of companies that offer mobile
services by piggybacking on existing networks. These
include Virgin Media and Tesco, which have more than 5m
customers each. Sky is to launch a similar service in the
summer, renting capacity on the O2 network.
Some analysts believe Hutchison will agree to stringent
remedies to win approval. It has invested more than 10bn
in Three since its launch in 2003, but last year the business
made a pre-tax profit of just 282m and it lags far behind
EE, O2 and Vodafone in the British market.
(Full article click - Times)
---

David Smith:
Britain poised to defy global turmoil with
growth charge
Taken from the Sunday Times 17 January 2016

BRITAIN will grow faster this year in spite of the global

market turmoil that has wiped 110bn off the value of public
companies so far this month, according to an influential
forecast out tomorrow.
The EY Item Club, which uses the Treasurys economic
model, expects 2.6% growth compared with 2.2% last year
on the back of a strong improvement in consumer
spending.
Item predicts a 2.8% increase in consumer spending as a
result of low inflation and the chancellors decision in his
autumn statement to postpone cuts in tax credits.
The upbeat forecast comes in spite of another grim week for
equity and commodity markets around the world, which saw
shares continuing to fall and the oil price slump to less than
$29 a barrel.
The lifting of international sanctions on Iran last night paved
the way for the country to ramp up its oil production,
undermining the crude price even more. Iran has said it
plans to export an extra 500,000 barrels daily within a week,
although analysts questioned whether it would be able to
increase production so quickly.
The FTSE 100 dropped another 1.9% on Friday, giving a total
loss of more than 7% so far this year. In New York on Friday
evening the Dow Jones industrial average fell 391 points, or
2.4%, to close at 15,988 down 8.25% since the years start.

The continuing decline brought some gloomy assessments

from key market players. Larry Fink, chief executive of
BlackRock, the worlds largest asset manager, said markets
probably needed to fall further before bearish sentiment
subsided. Technically we are in a bear market, he said.
The market is manic depressive, said Howard Marks, cofounder of Oaktree Capital, the biggest distressed-debt
investor. It swings from seeing only the positives to seeing
only the negatives and from interpreting everything
positively to interpreting everything negatively.
The Item Club sees a more positive picture in Britain. The
consumer had a welcome holiday from inflation and
austerity in 2015, and, until recently, this had looked set to
come to an end, said Peter Spencer, its economic adviser.
However, the combination of further falls in commodity
prices and the money that the chancellor found behind the
sofa for his autumn statement giveaways means that this
holiday will be extended into this year.
Global markets have started 2016 in a mood of deep gloom
about fears of a hard landing in China and the renewed slide
in oil prices. While economists say cheap oil brings benefits
to consumers in Britain, it causes deep difficulties for the
oil- producing countries as well as the economist of Goldman
Sachs, ONeill championed the rise of China and the other
Brics Brazil, Russia, India and South Africa.
Writing in The Sunday Times today, he says: There is
nothing in recent Chinese indicators to suggest the sort of
hard landing in the Chinese economy that would have serious
ramifications for the global economy. Their economy is going
through a necessary and complex structural reform, and
recent volatility shouldnt obscure the progress made. While
the authorities will face an ongoing challenge to rebalance
successfully, it is not clear that global equity jitters are
justified by any recent Chinese economic releases.
ONeill also said the markets had misunderstood recent
movements in the renminbi, as it developed into a global
reserve currency. It is in the process of becoming more like
other, more widely used, currencies, he said. They
sometimes go up, and they sometimes go down.
The Item Club thinks cheap oil will mean inflation in Britain
picks up only gradually, reaching just 1% by the end of this
year. Figures this week are set to show that inflation last
month was just above zero, but closer attention is likely to
be paid to the average earnings numbers, out on Wednesday.
Several members of the Bank of Englands monetary policy
committee have pointed to subdued growth in pay as a
reason for not contemplating an interest-rate rise. Market
turmoil has also pushed out expectations of the Banks first
move.
(Full article click - Times)
---

Global slump 'will force UK factories into

deeper recession
Taken from the Sunday Telegraph 17 January 2016

Manufacturers expected to cut investment as oil prices head

towards $20 a barrel mark
Tumbling oil prices will force Britains manufacturers to cut
back on investment, as the sector is stuck in a deepening
recession, economists have warned.
The UKs factories are likely to scrap capital spending plans
as signs of a global slowdown have renewed the oil price
rout. The slump, from $115 a barrel in the summer of 2014
to below $30 for the first time since 2004, has already
forced change in the manufacturing sector.
Analysts at Goldman Sachs and Morgan Stanley have warned
that Brent crude could drop still further, to as low as $20 a
barrel. Standard Chartered has said that prices could dive to
$10.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

An EEF survey revealed that more than 20pc of

manufacturers have said they intend to slash investment
spending if oil drops to $20, while less than 15pc intended to
raise capital expenditure if crude falls to those levels.
The collapse in the oil price, which started around 18
months ago, prompted investment plans in oil and gas
exploration and extraction to be scaled back or cancelled,
said Lee Hopley, chief economist at EEF, the manufacturers
organisation.
Further declines in the oil price will continue to depress
orders in 2016 and push any likely recovery in investment
plans for these sectors further out into the distance.
Anecdotal feedback suggests manufacturers who operate in
the oil and gas supply chain face lags of six to 12 months
once the price picks up to the $70 to $80 mark, she added.
However, the cheap price of oil will be a boon for other
parts of the manufacturing industry, such as chemicals
producers.
The oil sell-off has resumed as manufacturers find
themselves in the middle of a deepening recession in the
final quarter of the last year, said Ross Walker, an RBS
economist. Falling global trade will lead to a third successive
quarter of contraction, the bank predicts.
Its a tough year ahead for British industry, Mr Walker said,
with a looming referendum on the UKs membership of the
EU and signs of a slowdown in China and south-east Asia
beginning to emerge.
The grim forecasts for the manufacturing sector come as the
EY Item Club is set to say that low oil prices would benefit
the overall economy. As the commodity rout pushes down on
inflation, consumers are likely to feel better off, it will
announce in its latest set of forecasts.
EY will predict that consumer spending rises by 2.8pc in
2016, lifting overall GDP growth from last years 2.2pc to
2.6pc. The consumer was the main driver of UK economic
growth last year and EY Item expect this to be the case in
2016 as well, Mark Gregory, EYs chief economist, will say.
(Full article click - Telegraph)

News Americas
Fed battled internal fears of dollar impact from
QE
Taken from the FT Saturday 16 January 2016

The Federal Reserve embarked on a landmark expansion of

its quantitative easing programme in late 2010 in the face of
internal fears that it could be criticised overseas as an effort
to depreciate the dollar, transcripts showed.
Newly released records from meetings in 2010 reveal a range
of concerns within the central bank about the potential
implications of a further expansion of its monetary easing,
including the risk of provoking instability in financial
markets.
Among the worries expressed by Fed policymakers was the
risk of inflaming the so-called currency wars that were
raging, as some emerging markets complained loose
monetary policies in the West were driving up their
exchange rates and damaging their economies.
The Fed releases full transcripts of its policy meetings with a
five-year delay, lifting the lid on debates that went on
within the central bank over major policy issues.
The Fed went into 2010 expressing optimism that its stimulus
efforts following the financial crash were yielding fruit, only
to decide in the second half of the year that a further boost
was badly needed.
Among the drags on the US recovery at the time was the
euro crisis, with sovereign debt woes in Greece and Ireland
damaging confidence across the Atlantic. Janet Yellen, who
later succeeded Ben Bernanke as Fed chair, was forceful in
arguing that the action was needed to lift Americas
moribund recovery, as she warned in November of a dismal
outlook for the economy and the risk that the Fed would
miss its inflation and employment objectives by a country
mile for years to come.
The Fed only stopped its asset purchases in 2014, going on in
December of 2015 to finally lift its key rate by a quarter
point.
While the Fed began a $600bn programme of asset purchases
at the meeting in November with only one formal dissent,
the transcripts reveal misgivings along a number of lines.
One of them was currency. Jeff Lacker, the president of the
Richmond Fed, questioned the value of extra stimulus and
warned that, given the climate of international discourse
regarding currency valuations, it would not be helpful if the
Fed were perceived to be stimulating US growth via a
currency depreciation.
Kevin Warsh, one of the Feds governors at the time, said it
would not be politically correct for the goal of
depreciating the currency to be publicly expressed. I think
it is risky pool playing in the foreign exchange markets,
asking them to do so much of our work when the worlds
recovery is resting on this, he said.
Richard Fisher, then-head of the Dallas Fed, warned that
dollar depreciation, if viewed as a deliberate intention of
US government policy, will work against us in terms of the
rules-based system we have at the WTO and other rules that
we have to limit the potential damage of protectionism.
Mr Bernanke, the Fed chair at the time, said he understood
overseas worries about the spillover-effects of a weaker
dollar on emerging markets. But he said there were two
reasons why large-scale asset purchases were not an
aggressive or adverse act with regard to emerging
markets. One was that emerging markets also needed a
strong US economy, and the other that these spillovers were
a result of rigid currency policies overseas, rather than the
fault of the US.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Among the other revelations from the transcripts are the

deep concerns within the Fed about possible leaks to market
players. The transcripts show Mr Bernanke raising a number
of concerns about Fed communications.
He warned in October of legal risks if leaks occurred to
non-media outsiders including market players or former
officials. Mr Bernanke added that he was very
disappointed about stories appearing in the press discussing
internal deliberations.
Ms Yellen said in November the Fed policymakers were also
risking undermining principles of collegiality by staking out
firm positions on monetary policy in public before actual
meetings took place.
They do come close to feeling like a situation where we
walk into the room having said, in effect, that it doesnt
matter what arguments or evidence one of us around the
table musters, because our minds are made up, she said,
adding that the public comments were also stirring up
market volatility.
The Fed adopted a policy in 2011 aimed at tightening up on
communications but the controversy surrounding central
bankers dialogue with the markets has by no means died
down.
An alleged leak of sensitive Fed policy information in 2012
has since become the subject of a number of probes. Medley
Global Advisers, a research group which is at the centre of
the inquiries, is owned by the Financial Times.
The topic of central bank communications is also vexed in
other jurisdictions. The European Central Bank last year
came in for criticism over comments a top official made at a
conference organised by a hedge fund.
(Full article click - FT)
---

Irwin Stelzer
American Account: America remains the best
engine for global growth
Taken from the Sunday Times 17 January 2016

The final State of the Union address of any president evokes

thoughts that vary according to his success in office. For the
successful, such as Dwight Eisenhower, Ronald Reagan and
Bill Clinton, it is an opportunity to look back with some
satisfaction. Last weeks address by President Barack
Obama, with only 27% of his countrymen believing he will
leave the nation on the right track, must have made his
supporters think of what might have been.
For both the successful and the less so, it is goodbye to the
walk across the floor of Congress to the podium while
shaking hands and air-kissing admirers, hello to irrelevance
as the lame-duck president lays out his vision of a future
over which he will have little say. Example: Obama received
the usual numerous standing ovations from members of his
party, but when he extolled the virtues of the Trans-Pacific
Partnership, which he hopes will free up trade and set the
rules of international commerce for generations to come,
only the members of his cabinet rose to their feet in
enthusiastic approval. Other Democrats sat on their hands,
indicating that the pact is unlikely to be approved during his
remaining months in office.
That is not to say Obama lacks privilege or power in his final
year in office. Air Force One remains at his disposal; he can
and will issue executive orders, bypassing Congress and
stretching the constitution to its limits or beyond; he can use
his continued popularity with black voters to campaign for
congressional candidates who share his vision of more
government building infrastructure with funds from higher
taxes on families with annual incomes in excess of $250,000,
providing free tuition at community colleges, consigning

fossil fuels to the dustbin of history, raising the minimum

wage, tightening controls on gun purchases, supporting trade
unions even though they are the bitterest opponents of his
trade policies.
Most Republican presidential hopefuls are offering what their
party once called a choice, not an echo: tax cuts for
companies to discourage them from heading to greener lands
such as Ireland, where taxes are lower and regulation
lighter; repeal of regulations, including those promulgated in
Obamas war on coal; a shift from taxing incomes to taxing
consumption; less reliance on entitlements and more on
incentives to get discouraged workers back into jobs. In
short, it will be a battle of competing visions of the role of
government in Americans lives, with the result having a
profound effect on the US economy.
These doctrinal differences will play out in an economy
many believe is weakening rapidly. Pessimists see an
impending recession, as the current recovery grows long in
the tooth.
Optimists say growth will struggle to reach a flaccid 2% this
year. Both agree that manufacturing, already in recession,
will be hard hit by a strong dollar, kept aloft by its safehaven status and efforts by China and the European Central
Bank to weaken the yuan and euro.
Many are predicting something like a 5% decline in corporate
profits, continued weakness in share prices, and trouble for
banks that have lent generously to the oil industry, which
has seen the price of its product fall by two-thirds. The age
of zero interest rates is over, which means it will be more
expensive for businesses, the government, and potential
home and car buyers to borrow money, and that junk bond
funds will continue to scramble to sell highly illiquid assets
to meet the cash demands of investors.
Add strong headwinds from overseas, especially from China,
which is struggling to move from an export-based economy
to one relying on growth in domestic demand. America is not
quite so independent of the world economy as it proved to
be during the Asian financial crisis in 1997-8. Ruchir Sharma
at Morgan Stanley reckons that the share of foreign trade in
the US economy has risen from 18% to 23% since then, and
the share of profits earned by American companies from
overseas operations has jumped from 17% to 27%.
America is still the best house in a bad neighbourhood, but
the encroaching blight can no longer be completely ignored.
The Federal Reserve might want to do something to
stimulate growth and weaken the dollar, but it is moving in
the opposite direction, with further interest-rate increases
scheduled for March, unless signals of trouble force a pause.
If the bleak economic forecasts prove correct, the politics of
this election year will be seriously affected. Hillary Clinton,
the certain Democratic nominee barring an indictment for
her misuse of her email server or for merging the national
interest with those of the Clinton Foundation while secretary
of state, will have to move further left to appease an even
angrier Main Street. That will require stepped-up attacks on
the lefts traditional piata, Wall Street, and more promises
to reduce inequality by taxing the rich and increasing
income transfers to the unrich.
On the Republican side, voters will become more convinced
that the system is rigged against them, providing the meat
on which anti-establishment candidates in the Republican
primaries feed. That would be a plus for Donald Trump and
Texas senator Ted Cruz, more bad news for Jeb Bush, his
candidacy already on life support, and would result in calls
for huge tax cuts on upper-income entrepreneurs to
stimulate investment, a paradoxical position since lowerincome workers dominate the Trump camp. Whether
Democrats get to increase infrastructure spending, or

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Republicans get to push through tax cuts, the existing $18

trillion national debt will balloon.
Possible? Yes. Inevitable, no. The American economy might
just prove to be the engine that can pull the global economy
forward. Car sales remain buoyant and car makers bullish,
the labour market is in passable shape, commercial rents are
on the upswing as service-sector firms demand more space,
consumer balance sheets are strong. And in 12 months the
presidential succession will be completed, eliminating
uncertainty and, with luck, reducing the verbal pollution
that has made the American air almost unbreathable.
(Full article click - Times)
---

Canadian funds eye stake in National Grid

network
Taken from the Sunday Telegraph 17 January 2016

Ontario Teachers' Pension Plan and Borealis have held early

discussions about a potential consortium approach for the
business Two giant Canadian pension funds could team up to
launch a multi-billion pound bid for National Grids UK gasdistribution arm, The Sunday Telegraph has learnt.
Ontario Teachers Pension Plan (OTPP) and Borealis, which
invests in infrastructure on behalf of the Ontario Municipal
Employees Retirement System, are understood to have held
early talks about forming a consortium to table an offer.
FTSE 100 utility National Grid announced in November it was
planning to sell the business, which supplies 10.9m
customers across the Midlands, northwest and eastern
England and north London. Analysts have valued the assets
at around 11bn.
OTPP and Borealis are considered natural suitors for the
stake, having bought distribution operations from National
Grid in 2004.
The funds formed a consortium with Big Six energy supplier
SSE to acquire networks in Scotland and southern England
from National Grid Transco as the utility was then called
for 3.2bn.
The deal led to the formation of SGN, the company that
until 2014 was known as Scotia Gas Networks. OTPP and
Borealis each own 25pc of SGN, with SSE holding the
balance.
The latest sale by National Grid is in the preliminary stages,
and official bidding consortia are yet to form. However, a
host of funds are already believed to be weighing
approaches.
Because of the size of the deal, suitors are expected to
coalesce into a small number of large consortia. OTPP and
Borealis may be joined by other suitors, or could decide not
to make a joint bid.
An auction is expected to kick-off in May or June. Steve
Holliday, National Grids outgoing chief executive, has said
the utility is likely to retain between 25pc and 49pc of the
business.
Barclays, Morgan Stanley and Robey Warshaw, the boutique
Mayfair-based advisory firm, are handling the sale for
National Grid.
OTPP and Borealis have made a number of high-profile
infrastructure investments in Britain. These include High
Speed 1, the rail link between London and the Channel
Tunnel that is jointly owned by the two funds; Borealis
stake in Associated British Ports; and OTTPs ownership of
Bristol Airport. They are both also involved in the bidding for
London City Airport, which is expected to be sold next
month.
Spokesmen for Ontario and Borealis declined to comment.
(Full article click - Telegraph)
---

Is the Market Right That the Fed Is Wrong?

Taken from the WSJ Sunday, 17 January 2016

As markets tumble, some on Wall Street argue the Fed raised

rates too soon
Wall Street is learning what life is like with less central-bank
support.
For years, the Federal Reserve has been a crucial
underpinning for stock and bond markets. Just when it
looked like the economy was faltering or investors needed a
boost of confidence, the Fed was there to cut interest rates,
take steps to try to boost growth or assure investors it would
keep rates superlow. Much of the reason stocks, risky bonds
and other assets soared after the financial crisis was the
helping hand lent by the Fed.
In a matter of weeks, that has changed in dramatic fashion
after the Fed last month pushed interest rates higher and
displayed an appetite for as many as four additional
interest-rate increases this year.
Now, with stocks sinking as the dollar rises, the Chinese
economy faltering, oil prices collapsing and U.S. growth
showing signs of a slowdown, some are questioning whether
the central bank misjudged the ability of the economy and
markets to withstand rising rates and whether the Fed will
stay the course.
In recent communications with clients, Ray Dalio of hedge
fund Bridgewater Associates LP, which manages $154 billion,
argued that the Fed should stand pat for now and be
agnostic about raising rates later this year, according to a
person familiar with the matter. Jeffrey Gundlach, who runs
asset manager DoubleLine Capital LP, has said the Fed
shouldnt be considering boosting rates any time soon and
was premature raising rates last month.
The market is saying the economy is slowing quite
considerably. If the market is right, [Fed officials] almost
certainly wont raise rates as much as they said during the
December meeting, said Ben Inker, co-head of asset
allocation at GMO, a money-management firm co-founded by
Jeremy Grantham.
The central bank hasnt exactly pulled the rug out from
under investors. The Feds interest-rate move was widely
forecast. And its rates are still well below the long-term
average, meaning the banks stance is still relatively
supportive of economic growth and markets.
Other stimulative efforts for the economy by the Fed, such
as holding trillions of dollars in bonds, remain in place. And
Fed officials have indicated the bank wont automatically
raise rates further but will consider any changing
circumstances.
And despite the market anxieties, some investors and
analysts say Wall Street needs to start to wean itself from
the Feds easy-money policies and that the Fed likewise
needs to show Wall Street it wont always come to its
rescue.
Still, the disconnect between investors and the Fed was
shown in stark relief Friday. As the Dow Jones Industrial
Average plunged 391 points and Barclays PLC reduced its
estimate of U.S. growth in the fourth quarter of last year to
0.3%, Federal Reserve Bank of San Francisco President John
Williams called the U.S. economy dynamic, resilient and
in good shape.
Mr. Williams, who said he doesnt keep a data terminal on
his desk and tries not to get caught up in day-to-day market
moves, said the Fed might raise rates at least three times
this year, though he emphasized any moves would be
gradual.
Investors have begun to wager that the Fed will prove
hesitant to move rates this year, despite repeated comments
from various Fed officials that they are sticking to their

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

course. The December federal-funds futures contract is

priced at a level that implies an 82% chance the Fed will
raise interest rates one time this year, down from close to
100% just a few weeks ago, said Peter Boockvar, chief
market analyst at Lindsey Group.
The market does appear to now be pushing the Fed away
from raising rates, said Joseph LaVorgna, chief U.S.
economist at Deutsche Bank AG. History says the market
will win out because it has the ability to cause the damage
that the Fed and others desperately want to avoid, which is
a recession.
Some on Wall Street say investors hand-wringing is overdone
and the Fed should stick to its guns and keep raising rates.
Barclays Chief Economist Michael Gapen noted that U.S.
labor markets, which have been a reliable indicator of future
economic growth, show no sign of weakness.
Much of the pervasive gloom hanging over the U.S. outlook
is unwarranted, he argued in a research note.
And Mr. Boockvar of Lindsey Group argued that the Fed
should raise rates several times this year, even if it risks
pushing the economy into a recession, because it will put
the U.S. on a healthier long-term trajectory.
Regardless of the Feds ultimate moves, it is possible the
experience of recent weeks will leave investors less likely to
seek consolation from the central bank.
Weve got this situation where the stock market has
become fascinated with what the Federal Reserve does and
really thinks the Federal Reserve is there to help the stock
market, said Mr. Inker of GMO. It could be that the Federal
Reserve would like that relationship to change.
(Full article click - WSJ)

News Asia
Chinas Economy Grew Nearly 7% in 2015,
Premier Says
Taken from the WSJ Saturday, 16 January 2016

Pace would be weakest annual growth in quarter century

Chinese Premier Li Keqiang said Chinas economy grew
nearly 7% last year, with employment and household income
holding up despite weaker domestic and global demand.
Mr. Lis comments, made Saturday at the launch of the
Beijing-led Asian Infrastructure Investment Bank, affirms
that the Chinese economy is slowing while allowing the
government to say it hit the growth target of about 7% for
2015.
The government is due to release official data for the fourth
quarter and all of 2015 on Tuesday. A pace of 7% or lower
would be the weakest annual growth for China in a quarter
century.
Our GDP of year grew by around 7% or, in other words,
nearly 7%, Mr. Li told a gathering of foreign and Chinese
delegates to the AIIB at a state guesthouse in Beijing.
Mr. Li said given its large size, in absolute terms the Chinese
economy grew by more in 2015 than the year before, and it
is still one of the worlds fastest-growing major economies.
The economy is around $10 trillion, and Chinas annual
growth rate in 2014 was 7.3%.
Mr. Li said China achieved rather sufficient employment in
2015, expanding by a wider margin than expected. China
exceeded its target of creating 10 million urban jobs.
Chinas economy has appeared to many economists and
analysts to be decelerating faster than the government has
acknowledged, weighed down by debt, excess industrial
capacity and an overbuilt housing market.
As official statistics have stayed buoyant, doubts have been
raised about their reliability. Recurring plummets in Chinas
stock markets and botched attempts to bolster them have
further compounded questions about the governments
ability to manage the economy.
Premier Li said China faced a difficult economic environment
at home and abroad. However, China is resilient, he said.
Its 900 million workforce, including some 150 million skilled
professionals, will continue to help shift the economy, from
one built on natural resources to one built on human
resources in pursuit of a medium-high rate of growth, he
added.
Progress is already being made in restructuring, he said, with
services now accounting for half the economy and
consumption contributing nearly 60% of economic growth.
The economy has traditionally depended on investment and
exports.
(Full article click - WSJ)
---

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Jim ONeil:
Dont panic, China is just growing up
Taken from the Sunday Times 17 January 2016

The first two full weeks of trading in global equity markets

in 2016 witnessed the worst start to a year in at least 45
years, raising fears again that all is not well with the world
economy.
From my days in finance, I have learnt that when equity
markets decline in the first weeks of the year, quite often it
has been the prelude to a tricky year.
Most commentators have confidently identified the culprit
on this occasion: China, citing its weak economy, sharp drops
in its equity market, or its declining currency.
In addition to the risks from China, there remain challenges
from elsewhere in the so-called emerging world, while
advanced economy growth remains slower than before the
financial crisis, with economies struggling to outperform
even modest expectations.
But markets rarely go in one direction, and consensus
explanations for market developments are not always right.
There is nothing in recent indicators to suggest the sort of
hard landing in the Chinese economy that would have serious
ramifications for the global economy. Chinas economy is
going through a necessary and complex structural reform,
and recent volatility should not obscure the progress that
has been made. While the authorities will face a challenge
to rebalance successfully, it is not clear that global equity
jitters are justified by any recent Chinese economic
releases.
As for the Chinese currency, as the authorities move to
internationalise the renminbi, it will become more difficult
for observers to know where the currency is headed. But, as
I have said quite often, why is this a big dilemma other than
that it is a new development as China matures? Following
the recent decision of the International Monetary Fund to
allow the renminbi to be part of the international family of
reserve currencies, the currency is simply going to be a bit
less predictable than it has been the past decade.
The Chinese currency is in the process of becoming more like
other, more widely used, currencies. They sometimes go up,
and they sometimes go down. This will mean periods of
decline for the renminbi, such as now, and periods of
strength. For it to be described as a devaluation is
misleading and quite possibly unhelpful for world markets.
What is much more important for everyone across the world,
especially policymakers wanting to progress further from the
crisis of 2008, is whether China can continue successfully
adjusting its economy.
An increase in the share of consumption in GDP an
economy that is driven more by its own consumers is
better for its 1.4bn citizens and most of the rest of us.
While this will be a challenge for those used to dealing with
the old China, it is the only sustainable way for the world
to adjust, and most of us will benefit.
Today, other parts of the developed world have in principle
the capacity to deliver a stronger contribution to global
consumption. But, in reality, it is seemingly as difficult a
challenge as it has been for as long as the observation has
been present.
For the world to sustain growth throughout the rest of this
decade, the best hope is that the Chinese are successful in
raising the role of consumers in their economy.
The chancellor has been careful from a British policy
perspective, alerting people to the various risks from around
the world to the UK China included and reinforcing the
need for continuation of a considered policy of pursuing
domestic economic growth while maintaining the focus on
improving our public finances.

The most appropriate stance for the UK is to remain alert to

the risks from China and elsewhere, of course.
However, we must continue to offer our strong support in
trying to help China make this desirable adjustment. And,
beyond this, we should continue to increase our engagement
with the fastest-growing economies of the world.
(Full article click - Times)
---

S. Korea's macroeconomic uncertainty hits 3year high: BOK

Taken from the Yonhap News Sunday, 17 January 2016

South Korea's macroeconomic uncertainty touched a threeyear high in late 2015 as the U.S. interest rate hike and
China's economic slowdown have shaken financial markets
across the world, the Korean central bank said Sunday.
The Bank of Korea (BOK) said the macroeconomic index
based on eight indicators, including economic growth,
business sentiment and stock market indices, stood at 37.5
in December 2015, the highest since January 2013.
The index bottomed out in the first half of 2007 but surged
to a record high of 91.6 in 2009, in the wake of the global
financial crisis.
Uncertainties in the world's two largest economies have
raised concerns over the Korean economy, which is highly
dependent on exports and foreign investment.
The BOK kept its key rate frozen at a record low 1.5 percent
for January, citing remaining uncertainties in the global
market.
The bank said the U.S. Federal Reserve's additional rate hike
this year is expected to prompt an outflow of foreign capital
from emerging market countries, including South Korea.
(Full article click - Yonhap)
---

China to further open up capital market:

regulator
Taken from the Xinhua News Sunday, 17 January 2016

China's capital market will open wider to foreign investors in

2016 and domestic brokerages will expand business overseas,
the country's securities watchdog said Saturday.
China will gradually increase the quota for Qualified Foreign
Institutional Investors (QFII) and RMB QFII, said Xiao Gang,
head of China Securities Regulatory Commission, at a
national conference on securities market regulation.
QFII and RQFII are designed for foreign investors to trade
securities in China's largely isolated capital market.
China will work for A share's inclusion into global stock
indices, in a bid to make the performance of domestic
market more of an international metric.
The country will encourage sovereign wealth funds, foreign
pension funds and passive ETFs to increase investment in
China, according to Xiao.
In 2016, China will initiate Shenzhen-Hong Kong Stock
Connect, improve Shanghai-Hong Kong Stock Connect and
study the feasibility of Shanghai-London Stock Connect.
The country will also attract overseas institutional investors
to the domestic bond market through QFII, RQFII and
Shanghai-Hong Kong Stock Connect.
Hong Kong- and Macao-funded brokerages will be allowed to
establish joint ventures on the Chinese mainland.
In addition, the government will support domestic
brokerages to open subsidiaries overseas.
(Full article click - Xinhua News)

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.