China is growing at ‘reasonable’ pace despite pressures: Premier Li

31 Aug 2015 | Author: | No comments yet »

Asian stocks up for second day on US growth.

SINGAPORE: Tokyo shares led Asian stock markets higher on Friday after a surprisingly upbeat US economic growth report buoyed investors following a prolonged rout driven by concerns over China’s economy.The dollar gained and oil prices rose on the back of the US growth report, while the yen came under pressure from data showing Japan’s inflation was flat last month. Anthony Bolton, Fidelity’s famed stockpicker, launched a China fund in a year when the Asian nation’s economy grew by almost 12 per cent in the first quarter.

Tokyo stocks finished 3.03 percent, or 561.88 points, higher at 19,136.32, while Shanghai gained 4.82 percent, or 148.76 points, to 3,232.35.Sydney closed 0.58 percent, or 30.30 points, higher at 5,263.60, and Seoul gained 1.56 percent, or 29.67 points, to finish at 1,937.67.Hong Kong was the lone faller, with the benchmark Hang Seng Index dropping 1.04 percent, or 226.15 points, to 21,612.39. The Dow Jones – a narrow and pointless index if there ever was one – tumbled to an 18-month low only to regain much of its losses towards the end of the week. But they soared at midweek, cutting the Dow’s losses nearly in half, a rally analysts attributed to bargain-hunting and a new report that said the US economy is growing at a more robust rate than previously believed. Mr Bolton’s legacy fund — now run by Australian small-cap specialist Dale Nicholls — today trades on the London Stock Exchange at a wide 20.5 per cent discount to net asset value, depressed by China’s surprise currency devaluation this week and volatility on the Shanghai stock market. Still, the concerns that triggered the sell-off, such as China and worries about earnings and a possible increase in interest rates, mean there’s likely to be more market volatility ahead.

The dwindling number of China bulls argue that while its economic growth has slowed to 7 per cent, this level will be sustained as long as the country remains closely controlled by Beijing policymakers who determine everything from bank rates to birth rates. “You can see the Chinese government is trying to control the growth rate,” said Brewin Dolphin Asia Pacific analyst Mike Paul, referring to measures such as Beijing’s clampdown on so-called shadow lending by funds and trust companies. “You can argue they can raise it again.” In 2009, to shelter China’s economy from the global recession sparked by the sub-prime lending crisis in the US, Beijing prompted what could be a sub-prime crisis of its own. The Japanese currency was also hurt by data showing inflation in the Asian powerhouse fell back to zero in July while household spending dropped for a second straight month.The disappointing figures stoked speculation the central bank would be forced to unleash more stimulus this year to counter a downturn in the world’s number three economy, which contracted in the April-June quarter.In Tokyo trading, the dollar bought 120.86 yen, from 121.02 in New York and 119.98 on Wednesday.It was also at $1.1297 against the euro, down from $1.1239 in New York but still stronger than Wednesday’s value of $1.1312. The euro bought 136.54 yen, against 136.03 yen in US trading.Gold, which is seen as a safe haven in times of stock market turmoil, traded at $1,127.82, up from $1,125.00.

AMMB Holdings went up 3.07 percent to 4.70 ringgit, Malayan Banking gained 1.27 percent to 8.76 while Telekom Malaysia fell 0.15 percent to 6.49 ringgit. There are countless ways to protect a portfolio against a correction or even a crash – and the only excuse for being in the red last week was if you had been unfortunate enough to have started investing about a month ago. There is more than hindsight at work here; all of the scientific evidence suggests that we know the answers to lots of things – including minimising stock market losses – but most of the time we choose to take no notice of science. Businesses, politicians and ordinary people ignore scientific evidence all the time and then complain when things don’t work out as they expected them to.

What people refuse to accept is that all investors – from people with PhDs in finance commanding huge salaries at investment banks, all the way down to ordinary people playing with their little portfolios at home – are gambling. The other listed option for UK investors is the JPMorgan Chinese Investment Trust, which focuses more on large blue-chip companies that dominate China’s economy.

Perhaps it isn’t gambling in the same way that hanging around all day at the track trying to pick a winning horse is, but it is wagering all the same. This fund is also highly geared, at around 116 per cent, which its client director James Glover said is because there are multiple “opportunities” from the “pullback” in equity markets. It’s certainly not hedge funds, most of which have performed poorly against the market; – even Bill Ackman of Pershing Square, last year’s star hedge fund winner, is busy counting his losses this week.

There is no point in blaming China, the driver of much of the world’s economic growth for the past two decades, because if anyone tells you anything goes up in a straight line for ever then they are lying. It’s worth remembering that back in 2000, as the first dotcom bubble burst, the crash started in January but the real sell-off didn’t begin until September. This week Business Insider, the news website, published some research highlighting the best-paid American chief financial officers, whose compensation growth is now outpacing that of chief executives.

A smattering of well-known companies featured on the list – it should surprise nobody that CFOs at companies such as General Electric, Apple and Goldman Sachs make millions. What was more interesting was some of the other names listed, at companies only a hardcore US corporation watcher might have heard of: Antero Midstream Partners and Crown Baus Capital, anyone? Perhaps the biggest surprise was the name at the top of the list, with a whopping $72.7m (£47.2m) in total compensation: Anthony Noto, the CFO at Twitter.

His background – college football star; tech banking at Goldman Sachs, where he led Twitter’s IPO; and CFO of the National Football League, probably the world’s most profitable non-profit organisation – says little about his ability to turn a floundering tech platform into the profitable business it aims to become.

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