Investing in Southeast Asia

Investing in Southeast Asia: Proceed with Caution

by Carl Delfeld, Investment U Senior Analyst
Friday, July 20, 2012: Issue #1819

It’s no surprise to me that stock markets in Southeast Asia – what I call the “sweet spot” of Pacific Rim growth – are outperforming. While emerging markets are down so far this year, the Philippines is up 19%, Vietnam has bounced back 17% and Singapore has risen 13%.

Located south of China and east of India, this booming region is sometimes overlooked by even the most sophisticated investors. Yet it represents 10 countries with a population of 600 million and an economic output of $1.7 trillion.

A free trade pact between the Southeast Asian regional grouping (ASEAN) and China (ASEAN-China Free Trade Area), took effect in January 2010. By the end of that year, ASEAN exports to China had leapt 54% and overall trade between these countries jumped 47%. This free trade area has become the third largest in the world and more than 7,000 products trade at zero tariffs.

The next move is a work led by China’s prime competitors. The Trans-Pacific Partnership countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States – announced the achievement of the broad outlines of an ambitious, twenty-first century Trans-Pacific Partnership agreement that will supercharge trade and investment in the Pacific Rim.

This agreement will also boost America’s stake in this vital region. U.S. goods exports to the broader Asia-Pacific region totaled $775 billion in 2010, a 25% increase over 2009 and equal to 61% of all U.S. goods exported to the world.

Southeast Asia also sits astride the biggest trade routes in the world and the two busiest ports, Hong Kong and Singapore.

The South China Sea links the Indian Ocean with the western Pacific, but to get there ships need to move through one of several narrow straits that serve as chokepoints. To put things in perspective, the oil transported through the Malacca Strait from the Indian Ocean through the South China Sea, is triple the amount that passes through the Suez Canal and 15 times the amount that passes through the Panama Canal.

The stakes are high because roughly 65% of South Korea’s energy supplies, nearly 60% of Japan and Taiwan’s energy supplies, and about 80% of China’s oil imports come through the South China Sea. It also has proven oil reserves of seven billion barrels and an estimated 900 trillion cubic feet of natural gas.

The Probability of Conflict is Low, But Rising

But the importance of these prime trade routes and the natural resources in the area pose a risk to investors, as it makes the region a “cockpit” of rising confrontation.

China is intent on pushing its territorial claims well beyond conventional norms and Law of the Sea guidelines. Countries affected by China’s overreach, such as Malaysia, Philippines Taiwan, Brunei and especially Vietnam, aren’t rolling over, but rather pushing back hard.

Oftentimes the confrontations are sparked by fishing boats and escalate from there. This is how the recent standoff between China and the Philippines over Scarborough Shoal began.

In late May, CNOOC (NYSE: CEO), a Chinese state-owned oil company, announced it was opening nine blocks off Vietnam’s coast to international bids for oil and gas exploration. These reach to within 37 nautical miles of Vietnam’s coast, which extends 2,000 miles. Then on June 21, Vietnam’s parliament passed a maritime law that reinforced its claims to the Spratly and Paracel Islands. China shot back that this a “serious violation” of its sovereignty.

The 200 small islands and coral reefs – only about 40 of which are permanently above water -  that support territorial claims are highly contentious.

The countries that are eye to eye with China often look to America’s diplomatic and military clout to balance the scales. Japan and South Korea also have a significant stake in how the dust settles.

These simmering conflicts rarely make the front page and shouldn’t discourage you from investing in Southeast Asia. But they should prompt you to manage risks using wide diversification and 20% sell stops.

Good Investing,

Carl

http://www.investmentu.com/2012/July/investing-in-southeast-asia.html

How To Build Wealth Using Our Four Pillars of Wealth

How To Build Wealth

Achieve Your Financial Goals in the New Millennium Using Our Four Pillars of Wealth

An Investment U White Paper Report
By Alexander Green, Chief Investment Strategist, Investment U

Our philosophy of investing is this: You can’t go too far wrong if you get the big questions right.

The big questions are not “when will the economy recover?” or “where will the market go next?” True, these are the questions that most investors obsess over. But it’s a misallocation of your time.

The big question is how to build wealth with a game plan for the long haul and, more specifically, the following points that you can take action on:

• How can I secure the highest return with the least amount of risk?
• How can I protect both profits and principal?
• What can I do to build wealth and guarantee my investment portfolio will be worth more in the future?

Here’s how this philosophy can make this year – and your future ones – very prosperous.

How To Build Wealth Pillar 1: Stick to Our Asset Allocation Model

Successful investing begins by conceding that – to a degree – uncertainty will always be your companion.

You can guess what the market is going to do and be right or you can guess and be wrong. Or you can let some self-styled “expert” do the guessing for you. But no one guesses right consistently.

That’s why we follow a wealth-building investment formula that won Dr. Harold Markowitz the Nobel Prize in finance in 1990. His paper promising “portfolio optimization through means variance analysis” demonstrates how to maximize your profits and minimize your risk by properly asset allocating and rebalancing your portfolio.

Diversity Doesn’t Mean 3 Different Tech Stocks

Sometimes our readers tell us: “Oh, that means diversify. I already do that.” But that’s not what asset allocation is about. Right before the dot.com crash, you could have diversified into Microsoft, Intel, Yahoo and Amazon.com… and gone right off the cliff.

Asset allocation refers to spreading your investments among different asset classes, not just different securities or market sectors. Doing this has allowed us to survive, prosper and build our wealth, even during rough times.

High-grade bonds, real estate investment trusts (REITs), high-yield investments, inflation-adjusted treasuries, precious metals: It’s good to have at least a piece of each.

Because different asset classes are imperfectly correlated – some zig while others zag – our model allows you to boost returns while reducing your portfolio’s volatility.

In layman’s terms, proper asset allocation means you sleep better at night.

The Foundation of Our Philosophy

Asset allocation should be the foundation stone of your whole investment program. It’s critical to building your long-term financial health. To learn more about it, pick up a copy of William Bernstein’s excellent book, The Intelligent Asset Allocator.

How To Build Wealth Pillar 2: Adhere to the Oxford Safety Switch

Anyone can buy a stock or publicly traded fund. The real art of investing is knowing when to sell. Investment U does not rely on point-and-figure charts or tarot cards or Elliott Waves. Instead, we adhere to a time-tested trailing stop strategy. That means no member takes one of our stock recommendations without knowing in advance exactly where we’ll get out.

This takes the guesswork out of investing. And guarantees that both your profits and your principal are always protected. Here’s a quick review.

Let Your Winners Ride

We start all of our trading positions with a recommendation that you place a sell stop 25% below your execution price. As the stock rises, we raise the trailing stop. In other words, if you buy a stock at $20, your stop loss is at $15. When the stock hits $32, your stop loss (still trailing at 25%) will be at $24.

As long as the stock keeps trending up, we’re happy to hang on. If the stock pulls back 25% from it’s closing high, we sell. No questions asked.

And Cut Your Losses Early

You protect the profits you’ve earned on the way up and also protect your principal when things go awry. Everyone knows you should cut your losses early and let your profits run. But very few investors actually do it. The Oxford Safety Switch, championed by The Oxford Club, guarantees that you do.

During the bull market of the 1990s, many investors watched as their stock portfolios grew bigger and bigger. There was only one problem. They never took any profits. They had no sell discipline whatsoever. So when stocks started tanking, they watched many of those profits evaporate entirely. Some even turned into losses.

Other investors then bought stocks early in the ensuing bear market with high expectations. And they were crushed to see those shares drop to levels they never would have imagined.

In both cases, the fault was the same: They failed to have a sell discipline. Investors without one are flying by the seat of their pants. And that rarely ends in award-winning results. It’s simply not a practical means to build wealth.

Action to take: Use a trailing stop on all your individual stocks and have the gumption to stick with it.

How To Build Wealth Pillar 3: Size Does Matter Understand Position-Sizing

Often when the Oxford Club recommends a particular stock at a chapter meeting or seminar, someone in the audience will ask how much he or she should invest in it.

Of course, we know nothing about that individual’s net worth, investment experience, risk tolerance or time horizon. But we do have a position-sizing formula you can use to determine how much to invest in a particular stock: 3% of your equity portfolio. If you want to be conservative, invest less. If you want to be aggressive, invest more. But not too much more.

Don’t Fall in Love with an Investment

The saddest stories heard in the financial press are those of people who took a serious financial hit late in life because they were overconfident. In short, they liked an investment so much they plunked too much in it. Big mistake.

Yes, you could hit the jackpot that way and some people have. But that’s a roll of the dice and it’s not recommended.

Look at the thousands of people devastated during the recent bear market because their entire pension was tied up in their employer’s stock. More often than not, these folks had the option of putting the money into a diversified stock fund or safer alternatives.

Not spreading the risk might have felt like the right thing when the stock was rising, but it sure hurts on the way down.

You Can Afford the Hit

That’s why position sizing is important. It’s not just about the size of your initial position; it’s also about how much of your portfolio the position becomes. Many investors refuse to diversify even when a single stock becomes a substantial percentage of their entire portfolio. They always had the same excuse: “I just can’t afford the tax hit.”

But taxes should never be the first priority in running your investment portfolio. Former blue chips like WorldCom, Enron and United Airlines have taught us that – in hindsight – the federal tax bite can look like a kiss on the cheek.

How To Build Wealth Pillar 4: Cut Investment Expenses, and Leave the IRS in the Cold

Unless you run or sit on the board of the companies you invest in, there’s nothing you can do to affect your stocks’ performance once you own them. But there is a way to guarantee that your stock-portfolio value will be worth more five, 10 and 20 years from now.

Create wealth for the short- and long-term by cutting your expenses and stiff-arming the taxman.

Let’s start with expenses…

Just Say No To High Fees

Instead of buying the nation’s largest and best-performing bond fund, the Pimco Total Return Fund, we’re recommending the Manager’s Fremont Bond Fund (Nasdaq: MBDFX). You still get the nation’s top-performing bond fund manager, Bill Gross, but you forego the high fees and expenses associated with Pimco Total Return. Fremont is a no-load fund.

Likewise, we opted for the closed-end Templeton Emerging Markets Fund (NYSE: EMF) instead of the open-end Templeton Developing Markets Fund. Both funds invest exclusively in emerging markets. Both are run by Mark Mobius, the top manager in the sector.

But the Templeton Developing Markets Fund has a 5.75% front-end load. The Templeton Emerging Markets Fund – like all closed-end funds – has none. And it sells at an 11% discount to its net asset value (NAV). (You can never buy an open-end fund for less than NAV.)

In fact, there is nothing in our Oxford Portfolio that has a front-end load, back-end load, 12b-1 fees or surrender penalties. Furthermore, you can act on any of our recommendations through a no-load fund company or a deep discount broker that charges you no more than $8 a trade.

In short, a big part of our strategy in explaining how to build wealth is cutting portfolio expenses to the bone. Lower investment costs is the one, sure-fire way to increase your net returns.

5 Tax-Managing Tips (Reducing Expenses Helps To Build Wealth)

The second way is to tax-manage your investments. That means handling your portfolio in such a way that there is simply nothing there for the IRS to take.

Here’s how to do it:

1. Stick to quality. Higher quality investments mean less turnover. And less turnover means less capital gains taxes. The less you trade your core portfolio, the less tax liabilities you incur. As Warren Buffett warns, “the capital gains tax is not a tax on capital gains; it’s a tax on transactions.”
2. Try to hang on 12 months. Anything sold in less than 12 months is a short-term capital gain. And short-term gains are taxed at the same level as earned income, which can be as high as 38%. But long-term gains are taxed at a maximum rate of 20%. Even better, do your short-term trading in your IRA, where the gains are tax-exempt.
3. When you stop out in less than 12 months, offset your capital gains with capital losses. The IRS allows you to offset all of your realized capital gains by selling any stocks that have joined the kennel club. You can even take up to $3,000 in losses against earned income. Not selling your occasional losers is not only poor money management; it’s poor tax management.
4. Avoid actively-managed funds in your non-retirement accounts. Managed funds often have high turnover and Federal law requires them to distribute at least 98% of realized capital gains each year. You can get hit with a big capital gains distribution even in a year when the fund is down. In parts of Texas, this is known as “the double whammy.”
5. Own high-yield investments in your IRA, pension, 401K or other tax-deferred account. There’s no provision in the tax code to offset your dividends and interest. So do the smart thing. How to do this? Own big income-payers like bonds, utilities and real estate investment trusts (REITs) in your IRA.

	Average Portfolio	Oxford Portfolio
5 years	$140,255	$168,505
10 years	$196,715	$283,942
15 years	$275,903	$478,458
20 years	$386,000	$806,231

Your remaining choices are simple ones like owning tax-free rather than taxable bonds if you’re “fortunate enough” to reside in the upper tax brackets.

If you reduce your annual investment expenses and tax-manage your portfolio, the effect will be dramatic. For example:

The Vanguard Group of mutual funds recently conducted a study that indicates that the average investor gives up 2.4% of his annual returns to taxes. If you trade frequently, it’s likely much higher. We can also estimate that most investors give up at least 1.9% a year in commissions, management fees, 12b-1 expenses and other costs.

How to retain an additional 4% of your portfolio’s return each year: Reduce your expenses to .3% annually and tax-manage your portfolio.

Here are some important facts on how to build wealth and improve your portfolio over time using our strategy. The differences are not subtle.

The U.S. market has returned roughly 11% a year over the past 200 years. The previous chart reflects how a $100,000 stock portfolio grows at this rate – with the drag of taxes and high expenses, and without.

In other words, after 20 years, our cost-efficient, tax-managed portfolio is worth $419,000 more. (A million dollar stock portfolio, of course, would be worth almost $4.2 million more.) This is without factoring in any superior investment performance whatsoever! It’s simply the difference achieved when watching investment costs and taxes.

Armed with our Four Pillars of Wealth, a little diligence, and the discipline to stick with the program, we can all look forward to substantially higher real-world returns in our wealth-building pursuits.

The Four Pillars of Wealth, by the way, are fundamental to the success of Investment U‘s sister business, The Oxford Club, where Investment U’s profit strategies are put into action.

Good Investing,

Alexander Green

http://www.investmentu.com/research/buildwealth.html

LIBOR Rate Manipulation: What it Means for Investors

by Jason Jenkins, Investment U Research
Tuesday, July 17, 2012

The Barclays LIBOR case has brought to light LIBOR rate manipulation on a massive scale. What does this mean for your investments?

In case you’re not up on your major British multinational banking and financial services conglomerates, Barclays is headquartered in London and was founded in the late seventeenth century.

It has operations in over 50 countries and territories spanning across five continents. We’re talking upwards of 48 million customers. At the end of last year, it had a market capitalization of approximately $34 billion and was the twenty-second largest company listed on the London Stock Exchange.

So yeah, it’s a big deal…

LIBOR Rate Manipulation

Bear with me. The concept of the LIBOR rate is both simple and convoluted at the same time.

It’s almost amazing that it has a place in the world of high finance.

LIBOR stands for the London Interbank Offered Rate. This is the rate banks are charged to borrow money from each other.

Here’s how it works. Thomas Reuters, on behalf of the British Bankers Association (BBA), goes around daily to a bunch of BBA member banks asking how much it would cost to borrow money today from one another. The rate submitted isn’t based on anything concrete, but an estimate of what they believe they would have to pay. Take out the highs and lows, average the remainder, and you have your LIBOR for that day. Wow, that’s based on some heavy math and concrete data.

Now what does all this merry ole England stuff have to do with you?

Well, chances are you’ll never be in the market for an interbank loan in the U.K. – or at least I don’t think so. But, LIBOR isn’t just one rate with one purpose. Different LIBORs are calculated over different time horizons and in many currencies. The rate is used to price somewhere around $800 trillion of investment vehicles worldwide, including adjustable rate mortgages and student loans.

So what would be the reason to manipulate the LIBOR rate?

There’s been a lot of talk over media outlets that Barclays understated their LIBOR during the financial crisis. If they lowered rates, isn’t this good for consumers? It may have been. But that doesn’t look at the entire horizon of the story.

If you listen to the Regulators at the Commodity Futures Trading Commission (CFTC), the rate manipulation went in both directions. The rate submitted depended upon what type of contract the traders at Barclays were trying to make profitable. This has been documented as going back as far as 2005. That was at the height of market dealing and gambling.

It wasn’t till after the market hit bottom that there was pressure to keep LIBOR down. The lower your borrowing costs, the stronger the bank looked, and vice versa. Remember, the submissions are public record. This information would have easily been factored into pricing its equity.

And then consider that a low interest rate is good for mortgages and car loans because you pay less interest. However, if you’re trying to save in a LIBOR based investment that’s been manipulated lower, you may have been cheated out of return.

And it may have devastated your community. Many cities, pension funds and transportation systems had invested in vehicles based on LIBOR calculations in the mid 2000s. Those entities would have brought in less income if LIBOR was manipulated downwards.

It begs the question, “What cuts in your city or municipality may not have needed to be made?”

That’s why the city of Baltimore is leading a legal battle against banks, such as Barclays, that determine the LIBOR rate. It’s claiming the city’s budget cuts and layoffs were aggravated by the bankers’ LIBOR rate manipulation, which was linked to hundreds of millions of dollars the city had borrowed.

Will Justice Be Served This Time Around? (Probably Not)

Barclays got hit with about $450 million in fines from regulators both in the United States and the United Kingdom.

What may be even more devastating is another black eye for the banking industry. This story just doesn’t have legs across the pond. The initial findings are suggesting that some other global big time players such as Citibank (NYSE: C), J.P. Morgan (NYSE: JPM), HSBC(NYSE: HBC) and Lloyd’s Banking Group (NYSE: LYG) may have had their hands in the LIBOR cookie jar, too.

The bad press and fines may affect some bottom lines and the industry as a whole going forward – granted it hasn’t done much yet. But we may never fully realize the effect this had on unemployment rates and local economies around the United States and the world.

Good Investing,

Jason

http://www.investmentu.com/2012/July/libor-rate-manipulation.html

Are You Making These Investing Mistakes?

by MMARQUIT ·

One of the ways that you can build wealth, and live a little more abundantly is to invest. Investing can provide a way for you to put your money to work on your behalf. While there are risks involved in investing, and the possibility of loss, you can reduce some of that chance of loss by avoiding some of the more common investing mistakes.

As you consider investing, and how to build a portfolio that works for your situation, here are some common mistakes to avoid:

1.  Panicking with the Crowd

It’s easy to get scared and panic — especially when everyone else is doing it. However, you need to be careful about when you sell investments. While there are some very good reasons to sell a stock, it’s rarely a good idea to sell a stock just because everyone is in panic mode.

Instead, take a step back and look at the big picture. Are assets losing ground because the whole market is tanking? If so, you might not want to pull the trigger too quickly. Instead, consider the fundamentals. If the fundamentals are still solid, there is a good chance that your assets will recover in time.

2.  Trading Too Often

This can be tied with panicking, but it can also be its own problem. Too many of us get caught up in to day to day movements, and think that we need to trade a lot. While there are day traders who manage to make good money on regular market movements, it’s important to realize that these traders are dedicated to what they do.

Most of us regular folks are better off trading at wider intervals, or employing a dollar cost averaging strategy. Trading too often can cost you in terms of transaction fees, and there is a bigger chance that you will lose out.

3.  Lack of Diversity

If you want to reduce the overall risk of your portfolio, you need to remember to diversify to some degree. You need to make sure that your investments are diversified in terms of asset class, as well as across different sectors and industries. It also doesn’t hurt to diversify geographically and include investments from other countries. Avoid investing heavily in your company’s stock.

It’s fairly easy to start investing, and to diversify. There are index funds and ETFs that allow you to diversify easily, while at the same time helping you avoid some of the bigger risks that can come with  investing.

4.  Failure to Understand What You're Investing In

One of the reasons it’s good to start with stocks and bonds, and investments that are based on them (like index funds and ETFs), is because they are fairly easy to understand. You shouldn’t invest in things that you don’t understand. Take a few minutes to learn how different asset classes are traded, and how different investments work. It is also worth to learn what factors influence different investments. Get a handle on how different investments work, and you will be far more likely to find success and avoid some of the pitfalls that bring down investors.

http://couponshoebox.com/tips/are-you-making-these-investing-mistakes/?utm_campaign=Feed%3A%20CouponShoeboxTips%20%28Coupon%20Shoebox%20Tips%29&utm_medium=feed&utm_source=feedburner

Q&A: Spain's debt crisis and what it means for the eurozone and Britain

Stock markets are tumbling as Spain's borrowing rose to new record highs. Here is a look at why this is happening and what the implications might be.

Investors are concerned that Spain, one of the eurozone's biggest economies, might need a full-blown bailout. Photo: AP

By Angela Monaghan, Economics Correspondent

1:09PM BST 23 Jul 2012

2 Comments

Q: What has happened to Spain's borrowing costs?

A: Spain's borrowing costs rose to the highest level since the euro was created on Monday. The yield on benchmark 10-year yields rose to 7.5pc, where the higher the yield the lower the demand for Spanish debt.

Anything above 7pc is considered unsustainable. The Spanish government will not be able to afford to borrow indefinitely at such high levels, which means it will need a bailout if costs do not come down.

Q: Why now?

A: The crisis in Spain has escalated. It has been clear for weeks that Spain's banks needed emergency bailout funding, but now fears are mounting that the country will also require a full-blown sovereign bailout. European leaders on Friday agreed to grant up to €100bn (£78bn) of funds to Spain's banks.

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Markets have been spooked by news that two of Spain's regions - first Valencia and now Murcia - have been forced to seek emergency funding from the Spanish government, and others might follow.

There have also been further warnings on prospects for growth, as officials in Madrid warned the economy was likely to shrink throughout 2013. Spain is battling with a tough austerity programme as the government tries to bring down its debt mountain. The unemployment rate is 24pc, and roughly half of young people are out of work.

Q: What does it mean for the rest of the eurozone?

A: Eurozone leaders were already struggling to convince the rest of the world that the single currency has a sustainable future. They now face an even tougher job. Financially and politically, a bail-out for Spain would prove a huge challenge. And as we have seen with Greece, it is unlikely that it would be enough to permanently put to rest fears over Spain, and indeed other financially vulnerable countries including Italy and Portugal. Noise about a potential break up of the euro is once again building.

Q: What does it mean for Britain?

A: Europe is Britain's largest trading partner so continued problems in the region will weigh on demand for UK goods. The eurozone crisis is also damaging confidence among British businesses and consumers, who are unwilling to spend and invest at a time of heightened uncertainty. If one or more countries did ultimately exit the euro, the knock-on effect for the global economy would be huge, and Britain's recession prolonged.

Q: Is Spain the biggest problem in the eurozone?

A: Spain is an immediate concern, but so too is Greece. Greece's international creditors - the so-called "troika" comprising the European Commission, the International Monetary Fund, and the European Central Bank - will arrive in Athens on Tuesday to assess whether the government is making sufficient progress to earn another cash injection.

The visit is crucial: without further bailout funding Greece will be unable to meet its debt obligations or keep up with salary and pension payments. "If the current government fails, the next one will be a government of the drachma," said Costis Hatzidakis, the Greek development minister. Beyond Spain and Greece, there are also mounting concerns over Italy, as the government's borrowing costs rise.

http://www.telegraph.co.uk/finance/financialcrisis/9420469/QandA-Spains-debt-crisis-and-what-it-means-for-the-eurozone-and-Britain.html

The rise and rise of Asian financial centers. As the West bogs down, opportunities go East

July 23, 2012, 12:01 a.m. EDT
The rise and rise of Asian financial centers 
As the West bogs down, opportunities go East

By David Marsh, MarketWatch

SINGAPORE (MarketWatch) — A lot has been said and written about the power shift between East and West engendered by worldwide economic changes of the past 10 years, especially the 2007-08 trans-Atlantic financial crisis. But as British newspaper headline writers like to say when a transition of gigantic proportions is upon us: “You ain’t seen nothin’ yet.”

Already since the end of the 1990s, we have seen two phases in Asia’s economic renaissance. First came a period of rapid reserve asset accumulation by non-Western economies, an expression of current account surpluses, high savings ratios and a refusal to let currency appreciation damp rising exports.

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Europe's Week Ahead: U.K. GDP

The U.K. and U.S. will release second-quarter GDP figures while on the corporate side investor will be looking out for earnings results from banks Barclays and Lloyds and carmaker Peugeot. Dow Jones's Andrea Tryphonides and Nina Bains report. Photo: Reuters

Then, in the aftermath of the sub-prime imbroglio and then the collapse of Lehman Brothers, we saw stronger-than-ever signs of the Eastern economies’ resilience as the US and Europe remained bogged down in post-crisis doldrums.

We are about to witness a third phase: the powering ahead of Asian financial markets as a part of sweeping changes in the make-up of assets and liabilities around the world. The stage is set for Asian practices and principles gradually to come to the fore in global financial services.

There are several straws in the wind. Two of the top three stock market flotations this year — the $3 billion listing of palm-oil firm Felda Global Ventures and the $2 billion initial public offering of state-backed IHH Healthcare Bhd, Asia’s largest private hospital operator — have been carried out in Malaysia, a country that was hardly on the financial radar screen until a few years ago.

Malaysia’s cash-rich pension funds and fund management groups have allowed the country to buck the trend of scrapped IPOs that have brought setbacks this year not only in the West but also in Asian centers like Hong Kong.

Malaysia, too, has supplied the investors for a landmark property deal in London — the £400 million Battersea Power Station transaction for property group SP Setia, palm-oil group Sime Darby, and Employees Provident Fund, the country’s largest pension fund, which U.K. Prime Minister David Cameron intends to extol as a sign of a new investment partnership between Europe and Asia.

At a wider level, Asian fixed-income markets have been recipients of large inflows this year as investors around the globe pile into new asset classes free of the uncertainties overhanging the dollar and the euro. In M&A and private equity, investors and deal makers from Asia are assuming ever-more self-confident positions that make them less dependent on financial intermediaries and bankers from the West. In new product areas, watch out for a spate of offerings in Islamic finance that will mount a rising challenge to Western institutions, which are hardly in the best position to withstand competition.

Europe and the U.S. are reeling under the impact of a spate of financial industry setbacks — ranging from the sub-prime debacle and blatant disregards for investment-banking conflicts of interest through to the latest scandals over financial product mis-selling, Libor fixing and money laundering. Overshadowing everything has been the weakening of the banks, especially in Europe, as a result of the demise of the Western growth model and the buildup of debt owed by private and public-sector borrowers, part of which will plainly never be repaid.

Disparities have been exacerbated by Europe’s abject failure first to diagnose and then to repair the innate shortcomings of economic and monetary union (EMU), the single currency project that was supposed to promote growth, investment and employment but instead has turned into Europe’s melancholy union. The disappointments surrounding EMU have taken their toll on European investment banking as the hotly anticipated spate of M&A and capital-market opportunities induced by a single euro financial market has failed to materialize.

Differences between East and West have been enhanced, too, by America’s inability to put its public finances on to a sounder footing, which leaves the U.S. financial system at the mercy of adversarial political forces before and after the end-year presidential elections.

For bankers and product specialists, the message is clear. Growth, innovation and dynamism in financial services are likely to migrate beyond the West. Just as Asia in past centuries used to measure itself by reference to Europe (seen in the appellations “near East”,” far East” etc), in the future Europe and the U.S. are likely to register their own prowess by reference to Asia.

For financial practitioners who have grown up in the financial sector penumbra of the City or Manhattan (let alone Paris or Frankfurt), there can be only one conclusion. “Go East, young man! (or woman!).” Potential, responsibility and reward are on offer with ever-greater urgency in the centers of Shanghai, Hong Kong, Singapore and Kuala Lumpur.

If you work in financial services, ignore at your peril the implications of this sea change. The world is rapidly changing and if you want to capitalize on that, move to the places where things are happening. 

David Marsh is co-chairman of the Official Monetary and Financial Institutions Forum.
http://www.marketwatch.com/story/the-rise-and-rise-of-asian-financial-centers-2012-07-23?link=MW_story_investinginsight

Asia stocks slump on raging euro-zone fears

July 23, 2012

Asia stocks slump on raging euro-zone fears 
Hang Seng Index sinks 3%, led by sell-off in heavyweight HSBC

By Sarah Turner and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Asian stocks received a thrashing Monday as fears that Greece may not receive further aid and rising worries over Spain prompted a deep, region-wide sell-off, with Hong Kong equities suffering the most.

The dollar jumped against most other major currencies, barring the yen, whose gains against the greenback as well as the euro applied additional selling pressure in Tokyo. Crude-oil and other commodities tumbled.

Japan’s Nikkei Stock Average JP:100000018 -1.86%  finished 1.9% lower, South Korea’s Kospi KR:SEU -1.84% dropped 1.8%, Australia’s S&P/ASX 200 Index AU:XJO -1.67%  lost 1.7% and Taiwan’s Taiex XX:Y9999 -1.90%  slid 1.9%.

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China’s Shanghai CompositeCN:000001 -1.26% dropped 1.2%, while the Hang Seng Index HK:HSI -2.99% was the region’s worst performer, slumping 3%, or 587.33 points, to 19,053.47 in Hong Kong.

“[Reports of] the halting of a bailout tranche due to failure to meet targets, the European Central Bank decision not to accept Greek debt as collateral, and the visit of the Troika will keep markets nervous as default fears intensify,” said Mitul Kotecha, a strategist at Credit Agricole.

The Troika refers to the European Commission, the European Central Bank and the International Monetary Fund.

A German report over the weekend said that the International Monetary Fund may cut off aid to Greece. Read more on reported IMF Greek aid suspension.

Worries about Spain were also in focus, after the country lowered its gross domestic product estimates from this year through 2014. Reports also said Spain’s Valencia and Murcia regions may ask for Madrid’s financial assistance. See reports of aid for Valenciaand Murcia .

“Against this backdrop, we expect market tensions to persist. With the European Central Bank still reluctant to step in, the probability is increasing that Spain will have to ask for additional support, likely in the form of bond purchases by the European Financial Stability Facility,” strategists at Barclays Capital wrote in a report.

The Asian trading day began with a sharply bearish tone after U.S. and European markets ended with steep losses Friday, reflecting concerns that the weak global environment will affect growth and financial flows into the region.

U.S. equity futures pointed to another possible sell-off on Wall Street Monday, with Dow Jones Industrial Average DJIA -0.92%  futures sliding 116 points, or 0.9%, to 12,657.00, while Standard & Poor’s 500 Index SPX -1.11%  futures shed 11.70 points, or 0.9%, to 1,346.50.

http://www.marketwatch.com/story/asia-stocks-drop-as-europe-worries-weigh-2012-07-22?pagenumber=1