Very Good Proposal By Bank Negara

There is apparently a proposal by Bank Negara to change the way mortgages are calculated, which will greatly reduce the amount the public can borrow. The computation is supposed to be based on net income and not gross. That could reduce the amount that can be borrowed by 37%.





I think its an excellent idea. The only people who think this is bollocks are those with 2 properties or more. The affordability ratio has gone through the roof. Some may argue that a hike in real property gains tax would be a better move - I think not as it takes more than lesser profits to calm the property markets.


Property rides on expectations. If everyone expects prices to rise in the foreseeable future, its get in now or forever they will be out of your reach. That is the dangerous potion brewing in Malaysia and many Asian property markets. That kind of expectation has be neutered.


When you take things too high, the fall be greater, remember 1993-1997, the swath of liquidity just kept getting bigger and bigger. Just remember that when liquidity is sucked out of the system, you get a corresponding deflating effect, in multiplier effect.


Why property prices needed to be eased down? A survey done by The Edge on housing affordability saw property prices increasing from 5.9x income in 1989 to 10.9x in 2010. Left unchecked, it will soon climb to 15x your annual income.


 


The Global Property Scam


 A massive transfer of income to the very rich has occurred while middle class real incomes stagnated. The middle classes only tolerated this because Central Bankers created housing booms to keep the impoverished middle classes borrowing and spending to give them the illusion of prosperity and stop them from revolting.

How do you do that? You do that by keeping interest rates very low, keep printing money, keep the system very liquid - some have gone to equities but by and large the biggest beneficiaries have been property markets throughout most of the world. Yes, you see obvious bubbles in Singapore, HK, parts of China, Canada, Australia and even certain places in Malaysia. We thank our lucky stars that our property markets did not go through the same correction as the major developed nations - but is that because we did not have a massive contraction in liquidity brought on by a financial scare?

How is this scam hurtful? Well, you propel property prices higher and higher with low interest rates and excess liquidity. It serves to fan the flames of property prices higher, causing a bull run for the prices, causing people to chase and get some action before its too late.
Its never a zero sum game. Much of the froth in pushing prices higher has to be in much much bigger mortgages that people are taking to participate in the run. As long as the public can pay down their mortgages, you won't see foreclosures or a major correction. You and I know that prices have basically gone out of reach of the young and working.



We must applaud Zeti to have the foresight and strategic thinking to tackle this before it gets out of hand. Property owners may sigh and bitch but seriously, there is a price for everything - imagine the price of sugar and flour rising 10x, putting them out of reach of at least half the population. Nothing good can come from that.


Its not that property prices cannot be rising, they are actually a critical wealth builder and saving device for many families. Ask most people, all they are looking for is a few percentage gain a year over the longer term - when its nearly double digits every year for a few years, you know something is out of whack.


While we cannot stop people punting and chasing for homes to buy, we can at least address the amount of leverage they get. If Malaysia's average credit card debt per household gets to the RM80,000 or RM100,000 level, you cannot tell me that is not a problem. Why is it when its property loans, its your business only and not the government?

Flamengo 5 - Santos 4, What A Match!

Is this a genuine posting or just an excuse to feature Zhou Weitong again? Who cares? The match was brilliant. You can see the new blue yeyed boy of football Neymar doing his stuff scoring two goals for Santos. But you can spot the devious trick by Neymar when he comes in from the flank into the box - he will suddenly jibe into the box to trigger a foul to earn penalties. If you look at the run path of Neymar and the defenders in slow-mo, you can clearly see that its a good trick.



Ronaldhino showed that he is not over the whole hill yet. His free kick which gave Flamego the 4th goal was intelligent and well executed. ... and hey, Zhou Weitong also plays football in the mud!!!

RIO DE JANEIRO, July 28 — Ronaldinho scored a hat-trick as Flamengo overcame a three-goal deficit to beat South American champions Santos 5-4 away in an extraordinary Brazilian championship match.

The former Barcelona and AC Milan forward, leading scorer in the championship with eight goals, netted the equaliser and an 82nd minute winner as Flamengo fought back after Santos had raced to a 3-0 lead in 26 minutes.

Borges scored two goals for the hosts before Brazil’s teenage forward Neymar weaved his way past four markers to add a brilliant third in Wednesday’s match.

Flamengo pulled one back when Ronaldinho opened his account, taking advantage of a slip by Santos goalkeeper Rafael to score from close range, then Thiago Neves notched another for the visitors.

Brazil midfielder Elano missed a penalty for Santos before Deivid headed Flamengo’s equaliser from a corner, all before the end of the first half.

The drama continued after the break as Neymar put Santos back in front, before Ronaldinho took command, equalising with a free kick which went under the wall, then scoring the winner with an angled shot.

Flamengo are third on 24 points from 12 games, four behind leaders Corinthians. — Reuters

Using Quant to predict the World Cup

(click to enlarge)


You might as well applaud such a move as nothing much will get done during the World cup month. Possibly meaningless to Americans, but hey, they call the stupid baseball thing World Series and only American teams are playing???!!!




Whilst this report should be taken with a pinch of salt, we find it an interesting exercise and an ideal opportunity to lightheartedly explain Quantitative techniques and demystify the typical
Quant framework.

I am so fed up supporting England during World Cup tournaments, so I am deserting them and going for the very well balanced Spain side, as well as cheering on all the underdogs: Ghana, Japan, South Korea, North Korea, ... to name a few.

I was having lunch with an Englishman and a Brazilian yesterday (yea, business meeting in HK) and they were giving me a hard time when I said I will be supporting Spain. Geez ... I said that if asians were only "allowed" to support their actual country team, then we might as well forget about supporting any team for the World Cup. I said its lucky for them to be accidentally born in England or Brazil. I then asked them if their country teams did not make it to the World Cup for 10 or 20 years, what then, who would you support? That shut them up.

You will note that the headline of the JP Morgan report has England as the likely winner even though on team's strength analysis Brazil is tops and in betting Spain is favourite. When arguing over World Cup teams, its highly emotive and hence you have to use data only to remain impartial. Quantitative methods will use past data and then project ahead.

Their goal is indeed to highlight potential World Cup winners by applying quantitative or mathematical methodology traditionally used with balance-sheet, valuations and consensus information to data from the football world. To do so, they focused on data including:
• probabilities to win from a range of bookmakers and exchanges
• official FIFA World Rankings
• results from previous World Cup tournaments and qualifying competitions



In practice, Quants tend to use 4 types of information in their mathematical models:
1. Valuation metrics
2. Market and Analyst sentiment
3. Company fundamentals
4. Price trends

J.P. Morgan Cazenove "Normal' Quant stock-picking Model
VALUATION METRICS MARKET
- PE vs the market
- PE vs the sector
- Forecast growth
ANALYST SENTIMENT
- Recent change in analyst sentiment
- Recent change in analyst growth expectations
- Recent change in analyst recommendations
COMPANY FUNDAMENTALS
- ROE
- Company Risk
PRICE TREND
- Long term trend
- Short term trend

Source: J.P. Morgan

They then translate the above Model into a football-specific Model.
J.P. Morgan Cazenove Quant world cup-picking Model
"VALUATION" METRICS "MARKET
- "Market" Valuations
- FIFA World Ranking
& ANALYST" SENTIMENT
- Result Expectations
- Recent Team Shape
"COMPANY FUNDAMENTALS"
- Consistency in Market Sentiment
- J.P. Morgan Success Ratio Indicator
PRICE TREND
- Trend in probability to win
- Trend in FIFA's Ranking

Source: J.P. Morgan

If you can get the report, its a lot of fun. They looked at the actual FIFA world ranking and then looked at the usual probability in winning. Regressed them and somehow, some of the teams' rankings do not match up with their win probabilities. Portugal, Netherlands and Greece offer a disagreement with high FIFA World Ranking and low indicated probability to win the World Cup.

England, Argentina and Ivory Coast also offer disagreement with a low World Ranking and an indicated high probability of winning. According to the FIFA World Ranking Factor, Brazil, Spain Netherlands and Portugal are most likely to win the World Cup.



Hence based on that alone, a betting person should favour England, Argentina and Ivory Coast, ceteris paribus, and go against Portugal, Netherlands and Greece. On a side note, Greece might play luar kulit (out of their skins) owing to the homeland crisis and on the pretext that they may be booted out of EU soon (hence no more invite to Euro championships???!! ; ) )

They then look at bookmakers' odds to ascertain value against what the computer predict as their real value. They then plat charts based on the 6 month trending winning probability and a 3 month trending winning probability - a lot like 30 day MA and 60 day MA. Hey, a trend is your friend, it applies in everything.

According to the Trend in Probability to Win Factor: Slovenia, France, Ivory Coast and Greece are the most attractive options, having received the greatest increase in probability over the past 6 months.

According to the Trend in FIFA’s Ranking, Algeria, Slovenia, Serbia and Slovakia have the biggest change in World Ranking Points and should be preferred.

But of course, as wonderful the data may be, it still depends on the weightage you assign to each of the 4 factors. Herein lies the problem, JP Morgan assigned equal weightage to all 4.

The very funny part is that the last 2 pages uses the quant models to predict every match. In the quarter finals these are teams, according to the quants:

Netherlands vs Brazil (Netherlands will win)
France vs England (England will win)
Argentina vs Slovenia (Slovenia wins in an upset)
Italy vs Spain (Spain wins)



In the Semis:
England will meet and beat Holland, while Spain will edge out Slovenia.

Ta-dah, England beat the crap out of Spain in the finals. Yea, right!!!??

Asset Class Returns As At end-April 2010

April was relatively uneventful for the major asset classes in terms of total returns—with one exception. REITs scored another outsized gain last month, posting a strong 7.7% total return, based on the MSCI REIT Index. Real estate securities are also far ahead of the pack for 2010 after advancing by nearly 18%, or about twice as much compared to the next-best performance for U.S. stocks in the year-to-date ranking.

The fact that almost all other asset classes were flattish indicates that investors are probably equally bearish and bullish at the same time. Despite the troubles in Euro zone, all asset classes are like marking time. Safe to say that a large number of investors have stayed in cash for the time being but not totally out of it as it could very well rise another 10% from here for no apparent reason.

As I have said a number of times, its prudent to stay about 70% cashed up for the next month or two. The World Cup in June is not likely to bring much activity in all markets bar the US, as soccer still does not wield the delirium there that the rest of the world go through willingly.

In the wake of the price surge in real estate recently, the yield on equity REITs fell to 3.49% as of April 29, according to data from the National Association of Real Estate Investment Trusts. That’s slightly below the 10-year Treasury’s 3.76%. Is that a sure sign that REITs are set to correct? No, although it raises the risk in the asset class.

It’s worth noting that in the past, when the equity REIT yield overall dipped below the 10-year Treasury yield, it’s signaled rough times for real estate stocks. During 2006 and 2007, the yield on the 10 year exceeded the REIT yield. After REIT prices were crushed in 2008, the yield premium over Treasuries soared, reaching more than 7 percentage points over the 10 year in early 2009.Hence you may safely take REITs out of the performing asset classes by next month, and you are basically left with nothing positive, really.

Despite the lush levels of liquidity in the global system, commodities are still working off inventory. That does not bode well for growth emerging markets. Its a standoff for a couple of months.

HK IPOs Sizzling Hot

HK's IPO market has surpassed other financial centers by the proverbial mile this year. The liquidity arriving into HK from China and from the US carry trade have helped fuel the boom. The thing that sets this event apart is the proximity to the recent global crisis, and the pent up demand to raise cash by many large companies. Again, as I have warned before, I am quite uncomfortable with the upcoming UC Rusal IPO, a highly questionable and large IPO. Things could be derailed very swiftly if things do not go as planned.

The Standard: Hong Kong is now the world's premier destination for initial public offerings, having raised US$13.82 billion (HK$107.79 billion) in the first 10 months of the year.

Shanghai along with the increasingly hot Brazilian stock exchanges as well as New York were left in the wake of Hong Kong by the end of October, according to the World Federation of Exchanges after its latest month-by-month review.

Hong Kong was ranked top as the largest listing market by fund-raising size, the federation revealed. In taking the No 1 spot, it knocked the Shanghai exchange from the perch it had occupied for three straight months since July. Shanghai's IPO take for the year now stands at US$12.37 billion.

Yet funds being raised are still comparatively modest when compared to the 2006 and 2007 golden years - a period that was brought to a crashing end by the financial tsunami. In each of those years, the Hong Kong exchange counted more than HK$300 billion, driven by heavyweight listing candidates such as Industrial and Commercial Bank of China (1398). That raised HK$124.9 billion in 2006.

Hong Kong is now seeing investment capital pouring into the listing market "as there is no other way to go due to the low interest rate," said Bright Smart Securities general manager Nelson Chan Kai-fung.

The number of offerings this year to yesterday was 62 percent up on last year. Forty-seven companies have turned to Hong Kong this year for flotations, and two-thirds of them were listed in the July

-November period, according to Hong Kong Exchanges and Clearing (0388). "I believe the number of listing candidates will continue to climb in early 2010," said Prudential Brokerage's Mark To.

Companies are eager to cash in on market liquidity "before the central banks tighten monetary policy in the wake of economic recovery," To added. The surge in listings is also expected to continue next year because the SAR is considered a main beneficiary of efforts by the mainland to maintain its momentum. Indeed, brokers see China as the economy with the most growth potential. "The world is looking to tap the China market, and Hong Kong is the place which enables other economies to have access to it," To said. "Nearly 99 percent of the listing candidates generate income from the mainland."

Chan has a similar reading on the potential for the Hong Kong market. He believes it will draw more listing candidates from other countries, helped by an intense effort by HKEx to attract overseas firms.

Continuing the trend, UC Rusal, the world's biggest aluminum maker, is likely to be the first Russian firm to list in Hong Kong. It has a listing hearing on Thursday. It hopes to dual list 10 percent of its shares in Hong Kong and Paris this year - a move with an estimated value of US$2 billion.

p/s photos: Zhou Weitong

Top US Universities' Endowment Fund In Deep Trouble

Article from NYT:

Steep investment losses have caused painful cutbacks at some of the best-known universities over the most recent fiscal year and have prompted questions about whether their endowments are taking too much risk. But as the schools, one by one, disclose their numbers, the managers of these endowments are indicating their continued support for a diversified portfolio chock full of alternative investments like hedge funds, private equity and real estate — the very things that have caused so much trouble.

This portfolio strategy is sometimes called the Swensen model, after David F. Swensen, who heads the Yale endowment. On last Tuesday, Yale disclosed the details of its year, reporting an investment loss of 24.6 percent, compared with an average drop of 17.2 percent for large funds, according to the Wilshire Trust Universe Comparison Service. The fiscal year for all major university endowments ended on June 30.

Preferring to emphasize their long-term results, the chiefs of many big endowments, including Harvard, Yale and M.I.T., have indicated they are sticking with their models. Notably, Mr. Swensen did not lay out Yale’s asset allocation for the coming year in his statement — something he has done in years past. Yale pointed out that even after its latest loss, it has produced an average annualized gain of 11.8 percent over the last 10 years. According to Wilshire, the average return during that period was 4.3 percent for endowments with more than $1 billion in assets. Just how unhappy fiduciaries are with the returns last year depends on whether they are focusing on one-year returns or 10-year returns.

A number of institutions will be looking for ways to avoid some of last year’s biggest headaches, like not having enough cash on hand to meet capital calls, as required under their contracts with private equity and similar funds. Harvard, which was down 27.3 percent last year, has acknowledged it suffered a cash squeeze and has since raised its portion in cash, among other measures.

“In most cases they will make small changes in the allocation to various categories,” said Byron Wien, vice chairman of Blackstone Advisory Services. “People are gradualists.” Along with holding more cash, Mr. Wien says he believes that endowments need to have more funds in emerging markets and in the credit markets as growth slows in the western world.

The biggest endowments seem to have stumbled the most in percentage terms last year. Doing better than either Harvard or Yale, the Massachusetts Institute of Technology said that its fund fell a more modest 17 percent and that its diversification strategy of embracing alternative investments had indeed cushioned its portfolio, a third the size of Harvard’s, against the market swoon.

By contrast, Yale said that diversification had failed to protect its asset values. The biggest drag on its performance was a 34 percent decline in its largest asset class, known as real assets, which include real estate, commodities and timber. Over all, the Yale fund fell to $16.3 billion at the end of June. That decline included a $5.6 billion loss from investments, $1.2 billion that was applied to the university’s budget and $200 million in new gifts.

Some big schools remain skeptical about the push for alternative investments. TheUniversity of Pennsylvania did relatively well in an abysmal year, reporting a drop of 15.7 percent, and did not have a lot invested in private equity, real estate and natural resources. The school’s endowment chief, Kristin Gilbertson, said that she had been slow to get into private equity and real estate after she took over in 2004 because she worried that the size of private equity funds was too large and their fees too high. Over a five-year period, Penn had an average annualized return of 3.5 percent. That compares with 8.7 percent at Yale. Still, Ms. Gilbertson says she is in a better position for growth now, partly because the fund has avoided some of the problems that will continue as a result of private equity deals struck from 2005 through 2007.

p/s photo: Zhou Wei Tong

China's Rising Reserves, US Fiscal & Current Account Deficits

The following is a summary of a good article by Michael Pettis on whether China's reserves goes to fund the US fiscal deficit:

Mainland China's foreign reserves surged to a record US$2.13 trillion at the end June2009, confirming concerns that speculative capital is flooding into the nation to bet on rising asset prices and a quick economic recovery. Reserves rose US$178 billion in the second quarter, the biggest quarterly increase on record and up from the US$1.95 trillion yuan at the end of March. Most of the increase was driven by the very large trade surplus and smaller but still high net FDI inflows, plus of course returns on the existing portfolio. However, there is the unexplained portion of the increase in reserves, which serves as a proxy for hot money, has turned from negative in the first quarter to very positive in the second.

Hot money is pro-cyclical, and its effect will be to intensify growth in the short term, even as it increases volatility and makes monetary policy more difficult. China's central bank must recycle the net surplus on the current account and the capital account, and with the very high current account surplus, China would be creating a huge amount of domestic money just from that source. The fact that it is also running a large capital account surplus makes the central bank's monetary management that much more difficult. As long as this fiscal-stimulus-induced boom continues, hot money inflows will heat things up even more.

Does the fact that China has huge reserves mean that they will be buying loads of US Treasuries? Is China still funding the US deficit? Most people will not be differentiating between the US fiscal deficit and the US current account deficit. China is mainly funding ONE of them, not both of them altogether. When we take things and argue, we must be clear on the details because we end up revealing how shallow and little we know of the subject matter.

Goldman Sachs Group Inc. estimates that US government borrowing may total US$3.25 trillion in the year ending Sept. 30, almost four times the US$892 billion in 2008, to finance the budget deficit. Here is an example of warped thinking and a poor grasp of economics : “China’s reserves will allow the U.S. to run a higher fiscal deficit than other nations,” said Bilal Hafeez, the London-based global head of currency strategy at Deutsche Bank AG.

That is incorrect and flawed. The fact that China’s reserves have surged will in no way make it easier for the US to fund its fiscal deficit even though China has no choice but to invest these additional reserves in US Treasury bonds. Besides valuation changes and interest income, there are two reasons for the increase in the reserves – the very high trade surplus and net capital inflows into China. Take the second reason first. If money flows into China for investment purposes, it must flow out of somewhere else, and that somewhere else for the most part means the global pool of dollar savings which would anyway have been available to fund the US fiscal deficit directly or indirectly. China is acting like a unique bank that takes risk-seeking money and funnels it into low-risk assets. The USA profits from this intermediation while China runs a significant negative carry.

What about the dollars generated from the trade surplus and invested into US Treasury bonds? Won’t that help the US fund its fiscal deficit? Again the answer is no. The US government is not borrowing for abstract reasons, but rather is borrowing in order to spend locally to generate domestic employment. The amount of borrowing it needs to generate a fixed amount of domestic jobs is correlated with the US trade deficit, because it is through the trade deficit that domestic consumption “leaks out” to create jobs abroad. The higher the trade deficit, in other words, the more the US government needs to borrow to generate a fixed number of American jobs, and so the fact that China is reinvesting the dollars generated by the trade surplus with the US does not make it easier for the US to borrow since it simultaneously requires the US to borrow more. China does not fund the US fiscal deficit. It funds the US current account deficit, and it has no choice but to fund it. If the US wants China to buy US$1 trillion of new bonds every year all it has to do is ensure that the US runs a US$1 trillion trade deficit with China every year.

China may continue to bitch and scream about the Fed's printing press and the plethora of US Treasuries, but they will have to continue to buy and fund the US because the flip side of the coin does no one any good.

p/s photos: Zhou Weitong

Sigh .......

Saw this this morning in NST, see if you can spot the flaw:

-------------------------------

The number of Middle Eastern tourists visiting Malaysia this month and next could plunge by half based on initial data obtained from travel agencies.

Traditionally, more Arab tourists reach Malaysia in the third quarter alone than in the first half of the year. They also spend three times more than the average tourist. Based on the RM6,070 spending per person, a 50 per cent drop in arrivals could result in potential revenue loss of RM300 million for the country. While the tourism industry had expected a decline in arrivals given the shorter summer prior to the fasting month of Ramadan, they did not expect the number to be halved. Factors cited for the decline, apart from the global economic crisis and influenza A(H1N1), included the lack of advertisements in the Arab world this year.

In July-September last year, Middle East tourist arrivals fell 6.3 per cent to 108,665 from the comparable period in 2007.Travel agents are bracing for worse this year. Asia Overland Services Tour And Travels group managing director Anthony Wong said its inbound market from the Middle East had dropped 40-50 per cent.

"We used to bring in 18,000 to 22,000 in July and August. Now, we are not busy at all," he told Business Times. "This time around, we have been told by our agents in the Middle East that there has been a lack of advertisements compared to previous years," Wong said.

World Express Tours group president Tunku Iskandar Tunku Abdullah said that business at his agency had fallen 70 per cent in terms of tourist arrivals as well as value. "Currently, even forward booking is down due to the lack of advertisements in the Middle East," Tunku Iskandar said. He said that agents in the Middle East had told him that there had been a significant drop in advertisements on Malaysia compared to previous years. "They tell me that there is very little promotion that consumers can see compared to previously and to advertisements to other destinations like Thailand, Singapore and Australia."

Asia Experience Tours, touted as the largest agency for inbound travel from the Middle East, is expecting a more than 40 per cent drop in business in terms of tourist numbers and value. Its chief executive officer Ngiam Foon described this year as a "disaster", citing the economic crisis, H1N1 outbreak and other, better, deals offered by regional competitors. This year, they are not coming in big numbers," he said.

Calls to the secretary-general of the Ministry of Tourism went unanswered. It is understood that the advertisement and promotion budget alone for Middle East countries in 2007 and last year was around RM20 million. In reality, the amount is far more when the cost of its officers' fees, mega familiarisation programme, agent incentives and contributions from airlines are taken into account.

Last week, the Minister of Tourism revised downwards the projection for tourist arrivals this year to 19 million from 20 million.

--------------------

Who edited the piece? The headline was "Absent Ads Blamed For Fewer Arab Arrivals". Just because the tour agents said that ads were to be blamed for the drop in 2Q 2009 compared to 1Q 2009 arrivals, does not mean BT can absolve itself by making that as the headline. You can quote the agents but you must also have the journalistic integrity to comment that that is a flawed conclusion.

Any decent journalist or reader with average intelligence will be able to tell that there is this thing called the seasonal effect (maybe less holidays, better weather in Middle East, no bonuses in 2Q, etc.). It is wrong to say that a reduction in ads caused the 2Q figure to be lower than 1Q. In fact the 2Q 2009 figure was the higher compared to 2Q 2008 and 2Q 2007, which is better for comparison. If anything, the H1N1 is a major factor, and taking that into account, the arrivals figure in 2Q has been nothing short of amazing. The arrival figures should be lauded not derided.

Sigh.....


p/s photo: Zhou Wei Tong

China's Liquidity Traps & Benefits

China has been ramping up lending over the last 7 months. Yes, it was with good intentions. Yes, it was actual lending not just for show. Yes, banks in China were "asked" to do their bit to lend aggressively. While there is a lot of good to have money circulating around, it will also weigh down on those borrowing on the "unqualified" end of the spectrum, people who willing take on more debt than they should. Its a mini time bomb. No, it will not implode yet. What the figures below shows to me is that China's equity markets will have a major run up right through the end of 2009. When you pump in so much liquidity, there are very few places for it to surface. We may see a combustion effect only maybe in the second half of 2010.

China's credit card debt that was at least six months overdue rose 133.1 percent year on year in the first quarter to 4.97 billion yuan (727.67 million U.S. dollars), the People's Bank of China, or the central bank. Debt overdue by six months or more accounted for 3 percent of the total outstanding credit card debt at the end of March, or 0.6percentage point more than in the same period last year, the report said.

It warned of potential risks of the increasing overdue credit card debt as financial institutions expanded their credit card business. As of March 31, Chinese banks had issued more than 150 million credit cards, or 0.11 card per person, up 42.9 percent year on year. But Chinese consumers still have relatively few credit cards, compared with 4.39 per person in the United States and 0.95 in Brazil. Outstanding credit card loans rose 87.6 percent year-on-year to165.86 billion yuan at the end of March.

---

New bank loans in China will exceed 1 trillion yuan (US$146 billion) and may top 1.2 trillion yuan this month as the regulator expressed its concern over irresponsible lending, according to a newspaper report.

This month's figure may be the third-highest this year after March's and January's, the China Securities Journal reported yesterday, citing people it didn't identify. That would also represent a sharp jump from May's 664.5 billion yuan.

The news, coming in the wake of the central bank's remark on Thursday that it will stick to an appropriately loose monetary policy to support economic growth, sent bank shares higher yesterday on expectations of better profit.

Shanghai Pudong Development Bank gained 3.79 percent to 22.98 yuan while the Industrial and Commercial Bank of China, the country's biggest lender, rose 2.02 percent to 5.55 yuan, easily outperforming the key Shanghai Composite Index.

Earlier this week, the China Banking Regulatory Commission demanded that lenders avoid a sudden jump in loans at the end of each month and each quarter, a move used by domestic banks to meet internal targets.

The regulator told lenders to ensure the money is channeled to the right sectors such as small businesses to help stimulate the economy, and to monitor capital flow into the stock and property markets.

This month's lending surge was mainly fueled by mortgage loans and funding of government projects, the Journal said.

The new bank loans in the first five months of the year have reached 5.84 trillion yuan, more than last year's total and exceeding the government's target of 5 trillion yuan for this year.


p/s photos: Zhou Weitong

A Quick Run-Through Of Global Real Estate Hotspots

Real estate is a cumbersome slow moving asset. Its not like stock prices which can move up and down a few percent on the same day. Real estate is however a reflection of liquidity, a wealth indicator, a confidence indicator, a leading indicator, and a lagging indicator as well, depending on how you argue and look at things. Hence it opportune to have a peek at some real estate hotspots to see if the surprising bull run ties in with the investing situation in real estate.

Australia

The Australian housing market downturn is likely to be milder than in the U.S., UK and EU in 2009. Australia's house price correction had a head start going back to 2003. Furthermore, housing demand from migrants to the commodities-rich west and the chronic housing shortage in eastern Australia will keep prices from stabilizing back at pre-boom levels unless Australia fails to avoid a deep recession. Indeed, building approvals and housing loans to owner-occupiers began to recover since October 2008 after the government doubled grants for first-time purchases of homes until December 2009. Mortgage interest rates fell to their lowest level in four decades after the Reserve Bank of Australia cut the overnight cash rate 425bp within a year to 3% in April 2009, the lowest since 1960. Tax cuts, government handouts and lower petrol prices will also raise the affordability of housing. Affordability may not mean higher house prices, though. Despite increased sales (new home sales in Q1 2009 rose 20% since end-2008), house prices fell 6.7% y/y in Q1 2009. Rising unemployment and lower household wealth will keep buying sentiment mild this year but, short of a deep recession, improved affordability and ongoing housing shortages will help Australia avoid a housing crash as bad as in the U.S. and Europe.

New Zealand

New Zealand housing market is in worse shape than Australia's but is also likely to avoid as deep a correction as in the U.S. and Europe. The Reserve Bank of New Zealand has cut 575bp since July 2008 to 2.5% in April 2009 but longer-term, fixed mortgage rates have recently begun to rise again due to expectations of a quick recovery and higher interest rates. Fiscal policy has been laissez-faire towards the recession, opting merely for tax cuts as the government would rather not stand in the way of the economy's structural adjustment. With housing assets 5.7 times the household disposable income, New Zealand property markets are even more leveraged than their U.S. counterparts. House prices fell 8% in 2008 and are down 9.2% y/y as of April 2009. Some analysts believe the housing market will bottom on an annual basis in 2009. The housing market has already bottomed on a month-over-month basis, with the median price rising from $325,000 in January 2009 to $340,000 in April. Immigration has revived housing demand and sales have been strongest in the low-end segment thanks to increased affordability. However, new building starts and new home sales remain below the boom levels of 2004 and will likely remain so due to credit constraints, rising unemployment and sluggish economic growth in the year ahead.

United Kingdom

The housing sector is one the most important factors affecting the economic slump in the UK, which is similar in many ways to the difficulties facing the U.S. economy. The latest data on the UK housing sector continues to be mixed but some analysts are tentative to call the bottom in Q2 2009. The latest Halifax price index fell 1.7% m/m in April with price levels back to 2004 readings. Nationwide data brought a 0.4% decline in April but the y/y contraction fell from 15.7% in March to 15% in April. Mortgage lending showed some signs of recovery in April according to the data from CML with a 9% m/m drop. Despite hopes of a recovery, lending is still 60% lower than a year. The monthly data could be quite volatile in the coming months, drawing a slow bottom-like pattern. A real recovery of the housing sector will depend on improvement in the personal income and employment situation in the economy, which are not yet foreseen.

Asia

Asia has witnessed sharp real estate correction led by the Asian Tigers, plus China, India and Vietnam. All these markets saw declining home and office prices and rentals, lower sales and rising vacancies. Prices are approaching fundamental values and slowing construction activity might somewhat close the estimated excess supply. But further price and rental correction are imminent. This because household and corporate demand will remain subdued in 2009 despite policy measures such as interest rate cuts and fiscal incentives as well as attractive discounts offered by realtors. Slowing or contracting consumer spending and rising job losses in most economies are hitting residential and retail markets. Slowing corporate earnings and capex, declining exports and liquidity crunch are weighing down on commercial real estate. Though banks are reducing exposure to the real estate sector, lower earnings among realtors and income pressures among consumers are raising the risk of delinquencies. Nonetheless, as the global liquidity crunch abates overtime, high growth potential and attractive returns, given rising incomes and urbanization in developing Asia, will revive domestic and foreign investor interests in Asia's real estate.

China

Unlike many global markets, the residential property market in China is showing some signs of stabilization. Significant price discounting, lower mortgage rates, incentives and overly ample credit extension are contributing to an increase in transactions and helping to reduce the existing inventory. Chinese property prices began falling in mid-2008 as anti-speculation measures and slower economic growth reduced investment. However, transactions could slow if authorities rein in lending growth in mid-2009. Commercial property has yet to show signs of recovery. The global capex retrenchment is also putting pressure on commercial property as it delays some expansion plans especially by foreign companies. Although domestic companies are somewhat less affected, a slower pace of consumption growth may weigh on both office and retail property markets.

HK

The HK real estate seems to be bubbling up again at least in terms of sales to investors as increased credit availability, and a weakening US and Hong Kong dollar, encourage investment. However, new tenants remain scarce and vacancies are on the rise, suggesting further downward pressure on prices, especially as Hong Kong’s economy, including the financial sector, continues to contract and consumption weakens.

India

Home prices in India have corrected 15% to as much as 40% in some prime areas since September 2008. The recent pick-up in demand due to discounts by realtors and mortgage rate cuts by banks will be largely outweighed by the excess supply of homes in the market. So another 15-20% price correction is underway in residential and office markets over the next 6-to-8 quarters. This is especially because bank lending standards have tightened, households face wealth erosion and slowing job market, affordability remains low and corporate sector faces liquidity pressures. Mall construction and rentals have taken a hit and so have activity and employment in the construction sector. Drying funding from foreign investors and domestic equity market is forcing the indebted real estate firms to divest shares to raise capital, hold back expansion plans, and refinance bank loans which has been helped by recent central bank measures.

Singapore

Singapore's real estate sector started moderating in Q2 2008 and home and office prices witnessed record decline of over 10% in Q1 2009 with rents also falling sharply. Another 15% to as much as 25% correction is expected in the residential sector and may be even higher in the luxury section. Woes in the financial and service sectors, negative wealth effects among households and shrinking population due to outflow of laid-off immigrants – all will weigh down on residential and retail real estate. This will be exacerbated by falling speculative investment due to tight domestic and foreign liquidity.

Vietnam

Vietnam's property prices are down over 30% in some markets with luxury section taking the biggest hit and office rentals showing steep decline. Though realtors have been cutting prices and banks are resuming lending, demand has been slow to pick up. Investors also remain reluctant to enter the market since they largely depend on foreign liquidity. The sector is unlikely to improve in 2009 and this will be exacerbated by lower investment via remittances and FDI.

Japan
Economic downside risk in Japan was highlighted when exports plummeted by 49% year-over-year in February. The steep decline in exports, a key driver of economic growth, stemmed from faltering global demand and the strong Japanese yen. Amid the dramatic drop in external trade, domestic consumption slowed in the quarter as well. The government reports that, on a year-over-year basis in February, household spending shrank 3.5% and retail sales contracted by 5.8%, the steepest decline in seven years. Imports declined 43%. Bank of Japan’s latest tankan survey in March shows that large manufacturers turned more pessimistic about business prospects, which does not bode well for industrial production or the labor market. Indeed, the unemployment rate rose to 4.4% in February, a three-year high. The excess capacity resulting from the collapse in demand and consumption has increased the risk of deflation. Headline inflation contracted by 0.1% in February. In one of the few bright spots in the Japanese economy, bank lending in Japan grew by nearly 4% year-over-year in January and February, much higher than the growth during the same months last year. Commercial land values are falling. Land prices in the three major urban areas (Greater Tokyo, Nagoya and Osaka) in January declined by 5.4% year-over-year, the first drop in four years, according to the government. The decline was more pronounced in Greater Tokyo, where the government said that prices dropped 6.1% in January. Meanwhile, the tightened lending policies adopted by banks, coupled with the difficult business environment, have pushed up the number of companies filing for bankruptcy. In the first two months of 2009, corporate bankruptcies rose 25.5% over the previous year. That helped prompt a rise in office vacancy in Tokyo’s five wards to 6.1% in March, from 4.7% at year-end 2008. Vacancies are likely to rise further as companies consolidate their space requirements. Newly constructed buildings will be hard to fill as demand dwindles. We believe that weak demand will persist this year and competition for tenants will lead to more concessions from landlords – rental discounts, longer rent-free periods and other incentives. With demand for class-A office space likely to remain soft and rents under pressure, cap rates for class-A offices will likely rise in the quarters ahead, possibly by 10-30 bps. Commercial land prices will see further downside as well. Residential land prices are also falling. Land prices in the three major urban areas declined by 3.5% in January from a year ago, according to the government, which said that the decline was a bit steeper, 4.4%, in Greater Tokyo. The volume and velocity of transactions has slowed sharply. In Tokyo, only 621 new condominium units were marketed in January with a contract ratio of 67%. The number of unsold units stood at about 4,200 units at the end of January, almost double from a year ago. As part of the national budget for fiscal year 2009, the government has included steps to rejuvenate housing demand that include tax breaks of up to 6 million yen for home buyers who move into their property in 2009 or 2010. The amount of the tax break will be lowered gradually after 2010.

REIT Markets
REIT markets in Asia posted mixed results in the first quarter. REITs gained in Hong Kong (14%) and Malaysia (5.3%), but J-REITs and S-REITs posted negative returns, as investors raised concerns about refinancing issues. Still, REITs mostly outperformed the broader equity markets, possibly because investors were attracted by the deep discounts to net asset values (NAV) and higher dividend yields.

Total Returns, REITs vs. All Equities
1Q09 / 2008 / 2007 / 2006 / 2005
REITs
Hong Kong 14.0% / -28.9% / 10.4% / 9.8% / 2.0%
Japan -4.7% / -49.0% / -2.3% / 29.7% / 13.5%
Malaysia 5.3% / -14.8% / 17.8% / N.A. / N.A.
Singapore -1.1% / -56.1% / 2.8% / 57.9% / 22.2%
All Equities
Hong Kong 0.2% / -52.4% / 40.3% / 32.6% / 11.3%
Japan -8.9% / -41.4% / -11.3% / 2.9% / 47.4%
Malaysia 1.0% / -39.7% / 43.0% / 31.4% / 1.1%
Singapore -3.7% / -50.9% / 22.1% / 33.9% / 16.1%

Indeed REIT yield premiums ranged from 569 to 940 bps above long-term government bond yields. As of the end of March, the region had 83 REITs with a total market capitalization of US$44.4 billion, which is moderately down from US$45.2 billion at end of last year. The weighted average dividend yield fell by 30 bps in the first quarter, to 8.2%.

Market Cap and Dividend Yields of Asian REITs
No. of REITs / Market Cap (US$ bil.) / Average Dividend Yield / Risk-free Rate /* Risk Premium (bps)
Japan 41 / 26.28 / 7.03% / 1.34% / 569
Singapore 21 / 9.93 / 11.40% / 2.00% / 940
Hong Kong 7 / 6.92 / 7.80% / 1.93% / 587
Malaysia 11 /1.10 / 10.80% / 1.89% / 891
Korea 3 / 0.17 / 10.60% / 4.68% / 592

Total 83 / $44.4 / 8.20% (weighted average based on market cap)

p/s photos: Zhou Weitong

Cricket Terminologies For Dating & Sex

Well, to really appreciate this posting, you have to be a fan of cricket like me. Sports mad fans will stand or sit and drink their Tooheys (or VB if you are from the inferior southern city), and cricket being cricket, there will be plenty of time to talk about other stuff. Cricket is full of its own lingo, positions, batting, bowling, catches, fielding... its natural to associate those terms with dating and sex, especially when you are talking with your mates in a pub. Somehow football does not have that many terminologies of phrases where you can equate to dating and sex. We can try:

he missed the bloody penalty - a girl who really likes a guy but he just didn't care

he took a dive in the penalty box - a guy pretending to be someone high and mighty to impress chicks

he was yellow carded - a guy who has been rejected a couple of times by different girls in a bar

he was red carded - a guy trying to pick up chicks in a bar but his girlfriend/wife arrived

he took the ball to the corner flag - playing for time, wasting time, when nothing's ever gonna happen with him and the girl

we did a nice one~two - you and a wing man cooperating to court a chick in a bar successfully

Anyway, you get what I mean, here are some juicy cricket terminologies:

Let one go outside off: Decline an invitation from an unsuitable partner.

Smack one over the bowler's head: Succeed very quickly with a woman.

Pull one over the covers: Masturbation.

Fending 'em off down the leg side: Too many woman to handle.

Fielding at first slip: Running off your mate who has a surplus of feminine attention.

Bowling from both ends: Working two women in the same room.

A barrage of bouncers forcing you to duck for cover: More than one ex-girlfriend in the room while you are trying to tune other women.

Getting your eye in: Practice conversations with women earlier in the night.

Dispatched to the boundary: Have sex.

Whip the bails off: Masturbation or getting a woman's smalls off. "How'd ya go mate? Did ya even get the bails off?

They're flying off the edge: Attempts at conversation or connection with the opposite sex are going awry.

Let it go through to the keeper: Ignore a flirtatious offer from a woman or allow a woman's phone call to go to voicemail.

Batting too high up the order: Aiming too high with women.

Playing county cricket: God's gift to Australian men; English backpackers.

It's all about time in the middle: You need to talk to women often to become successful at it.

Seeing them like watermelons: Having great success with the opposite sex.

Coming out of the hand nicely: Your interactions with women have proved positive so far.

A one-dayer: A one-night stand.

IPL: Exotic action.

Twenty20: Explosive, short-lived sexual encounter, typified by flashy stroke-play.

Running between the wickets let you down: You've drunk a little too much.

Played a very straight bat: You didn't come on to a woman in any shape or form. Usually a mate's ex or sister.

Lot of moisture in the wicket: Many women present at an establishment.

Lot of turn in the wicket: Your interactions with the opposite sex are garnering unpredictable results.

Bowling into the rough: Trying to get a reaction from a woman.

Spent a lot of time at the crease: You've been drinking and/or chatting up for many hours.

Left arm around the wicket: Gay.

French cut: Blokes who act effeminate around women.

12th man: Carries the drinks all night, doesn't get any female company for his troubles. "I've been 12th man the last three weekends in a row."

Appeal against the light: Decline to have sex with a person because of their race/skin colour.

Battling without a helmet: No contraception.

Taking the new ball: Partaking in chemical enhancement after too many beers.

Leg byes: Pulling a root without a great deal of effort.

Enforce the follow-on: Sex after sex. "Mate, we both woke up at 10am and she enforced the follow-on."

Right-arm orthodox: The missionary position.

The yorker: An acute, well-delivered line or action that virtually guarantees sex. "We were getting on pretty good and they I yorked her, so she had to play at the ball."

Seagulling: Sitting in a pub on your own or with a couple of mates and making no contribution whatsoever to the pursuit of the opposite sex.

Duckworth-Lewis: The formula employed to gauge how many drinks you're prepared to buy a woman in order to get her into bed.

Adjust the sight-screen: Drink a few more beers in the hope the girl will somehow grow hotter.

Stranded at the non-striker's end: Your wing man, who was keeping a woman's friend busy, has crashed and burned and both females have brushed you.

Wide ball: Fat.

No ball: Fugly.

Ball tampering: Shaving your privates for a partner.

Night watchman: The father of a young girl with a curfew.

Underarm delivery: Australians acting like dickheads.

Pitch report: When your mate points out the hotties in the place when you arrive.

Stranded on 99: Getting along great in bed, clothes off, about to raise the bat and kiss the emblem and the girl gets cold feet and says no. Doesn't happen often and it was a good knock until then.

Do a Gilly: Walk when you didn't have to, the girl is ready to go home with you but you somehow disappear (tribute to Adam Gilchrist).

p/s photos: Zhou Wei Tong

Who Should Take Over From Alex Ferguson?

Being a die hard Red Devils fan since the late-70s, I have endured difficult periods the club went through. Safe to say that the revival of MU, back to the glory days of the 60s, had a lot to do with the appointment of Alex Ferguson. The tenure of Ferguson shows that stability of the manager is extremely crucial to long term team building, morale and continuation of football values and what the club stands for. There was an article today which quoted Manchester United defender Rio Ferdinand as insisting that Jose Mourinho has what it takes to succeed Alex Ferguson as Red Devils manager.

England center-half Ferdinand reckons the Portuguese coach has the credentials to follow in 67-year-old Ferguson's footsteps. Mourinho, who guided Chelsea to two English Premier League titles, is manager of Italian champions Inter Milan, who face United in the Champions League round of 16.

"There are very few people who could take over," Ferdinand told GQ magazine. "If you're talking about someone with the ego and personality to do it, then Jose Mourinho is the name that jumps out at you."

However, United legend Bobby Charlton does not believe Mourinho would be able to build on Ferguson's legacy. "I don't see him here," the World Cup winner told The Mail on Sunday newspaper. "He's got a talent but maybe if he ever came here the philosophy of youth football might never be the same again."

Fellow club hero Bryan Robson added: "Attacking football is a vital part of the club's heritage. For me, Jose Mourinho is too cautious in his approach to be manager."

Ferdinand gave an insight into the kind of personality required for the job as he detailed. Ferguson's notorious "hairdryer" treatment - giving players a full-on verbal roasting. "If you talk back to him, he just keeps going louder and louder until you

shut up," he said. "And he's right to do it and we all know that if we do it again, we'll be out the door. He's a winner, full stop."

Well, I think Mourdingo is a good manager but too egotistical, he needs to be more important than the club. Plus I don't think he will last long at the club. He will probably antagonise the owners and management too much with what he wants and will try and bulldoze his ways. He has done well with Porto but at the big stage, he has only been with Chelsea with an open cheque book. He has not shown any ability to bring players through the ranks, nurturing them.

Ferguson is also egotistical but he has earned the respect hence he can demand it. He works closely with management and owners. He has built up a critical young players program which feeds through the team and gives it a sense of belonging and culture. Whoever comes in has to continue the tradition and respect the values. Many opposing club supporters will cringe when I say the values that MU represents: "good open attacking football". MU may not be absolutely clean or perfect but they strive to be clean and fair, MU's one fallacy is also their strong point - the refusal to do restrictive man-to-man marking. That is why you will see all teams being able to wander as they like upfield instead of being tackled hard and close every time they get the ball. MU rely on maintaining structure and inviting teams to attack if they can. Football can be too pragmatic like the overly defensive Germany style or the robust tackling of the Italians. Cynical fouls are less by MU as well. Hence whoever takes over will have to have the ability to manage and nurture the culture, as well as having the footballing sense to maintain or elevate MU further.

My number one choice has to be Martin O'Neill. He is smart, passionate and has worked wonders with lesser teams. Any teams he has been with has seen their fortunes and camaraderie elevated. He will have the respect, and he is British enough to respect the roots of an English football club. What that means is not to turn the team with great tradition into one where they are fielding 9 non-English players, you know what I mean. I also think he is football's best tactician. Plus he will be there for a long time.

p/s photos: Zhou Wei Tong