China’s Shrill Shanghai Hub Hullaballoo
Chinese shares joined other large market laggards with a roaring start to the Year of the Dragon on a break in foundering macroeconomic data and a slew of securities initiatives aimed at domestic and foreign investors. The main regulator highlighted a push to restore confidence at the annual Communist Party financial work conference with plans for new IPO procedures and retail account protections, while hinting at enlargement of FII quotas. Previously the National Social Security Fund announced increased equity allocation and local government pension plans may also be authorized to participate directly. Liquidity injection through robust money supply and bank lending figures supported enthusiasm, and Hong Kong was reassured that the “door would open wider” for smaller state firms to list there. The outreach came as renimbi deposits in the offshore center began to fall as appreciation was seen to crest and dollar safe haven switching jumped with the spreading Eurozone crisis. The planning agency along with Shanghai authorities then revised their global hub outline for mid-decade to include yuan clearing and trading as a core business pillar through establishment of benchmark rates and derivatives. They reiterated plans to attract foreign listings as an “international board” is soon to go operational although issues of broader capital account and currency convertibility were unaddressed. Among innovative products ETFs and REITS will be tested, and partnerships will be explored with overseas exchanges following agreement among BRIC members to cooperate on information and access provisions. In Beijing, where all the industry supervisors are based, officials vowed to strengthen standards while ensuring that prevailing risks, including in property and provincial loans, were “controllable.” State lenders with single-digit price-earnings valuations reported good profits, and according to the BIS have deepened trade and syndicated credit penetration in Asia in particular with European escape.
They made headlines with arrangement of a $1 billion facility for Reliance Communications run by Indian billionaire Ambani. His prominent group aided in obtaining another early-year turnaround for shares there with a $2 billion buy-back as the rupee rebounded to the high 40s against the dollar with minor monetary easing on steady inflation and exchange opening to foreign individual investors. Non-resident Indians have poured money into high-yield bank deposits, and FDI liberalization resumed with a modified plan for retail chain entry after the original design met with small trader and opposition party outcry. With GDP growth slipping to 7.5 percent, officials intend to rein in the fiscal deficit which has regularly exceeded responsibility law bounds. As the second Singh administration winds down, fresh physical infrastructure and anti-corruption overhauls have been signaled with all suspect telecoms licenses being revoked in a repudiation of past prerogatives.
