Sunday, December 13, 2015
Asian banks and the coming credit crunch; Saudi Arabia elects female local councilors; China's football revolution
1 Asian Banks and the coming credit crunch (Matein Khalid in Khaleej Times) The smoke signals from the world's central bank define my macro angst. Take India, the jewel in my short-sale crown. I find it amazing how many investors are still bullish on Indian shares and bank credit even though the Reserve Bank of India has now sworn to clean the manner in which banks classify, fudge and hide non-performing loans.
In effect, this means Dr Raghuram Rajan will force bank chief executives to boost provisioning rates on "restructured loans" with peekaboo accounting. This means Indian banking faces a regulatory/earnings shock of (forgive the tired awful cliché!) Himalayan dimensions. At the very least, this means curtain Indian bank shares will be a license to make money on the short side as earnings growth expectations are crushed on Dalal Street.
I had grown nervous on Japan at 20,000 Nikkei and ¥123. However, I am not comfortable
even at 19,000 Nikkei and ¥121 since Bank of Japan Governor Kuroda will do squat on more easing. The next big Bank of Japan move could happen in April when the yen could well be trading at ¥115 to the US dollar. This means there is a bloodbath in the near future for leveraged investors in Japanese equities.
The 40 per cent plunge in the Turkish lira and Malaysian ringgit bas taught Gulf bankers, investors and sovereign wealth funds a hard lesson against investing in economies with poor governance, leveraged banking systems, corrupt political elites and hyper-volatile hot money capital flows.
Now higher US rates are the kiss of death for the Indonesian rupiah, borrowing costs in US dollar will at least triple in 2016, a financial Black Death for leveraged corporates from Bombay to Jakarta, Istanbul to Kuala Lumpur, already devastated by mediocre global growth and a shrinkage in world trade. So 14 times earnings means 2015 is the year of living dangerously in the Jakarta.
2 Saudi Arabia elects female local councillors (Ian Black in The Guardian) Saudi Arabia has elected its first female local councillors in a historic step for a country where women are banned from driving and face routine discrimination.
Results from Saturday’s municipal council elections indicated there were about 17 female winners. These included four in Jeddah, one near Mecca – home to Islam’s holiest site – and others in Tabuk, Ahsaa and Qatif.
Rasha Hefzi, a prominent businesswoman who won a seat in Jeddah, thanked all those who supported her campaign and trusted her, pledging: “What we have started, we will continue.” Hefzi and other candidates used social media to contact voters because of restrictions on women meeting men and bans on both sexes using photographs.
Local elections were held in 2005 and 2011, but this was the first time women were allowed to take part. The powers of municipal councils are limited to advising local government and helping oversee budgets, but the election has still been hailed by women activists as a crucial first step towards achieving wider rights and broadening the understanding of civic engagement.
No candidates addressed the broader issues of democracy, human rights or the role of sharia law and punishments, which attract so much attention abroad. Saudis who boycotted the poll dismissed it as window dressing, arguing that real the power rests firmly with the royal family, the religious establishment and male ministers.
For all the excitement, Saudi women are still banned from driving and are required to cover themselves in public. They are subject to other routine restrictions including the permission of a male guardian to leave the country.
3 China’s football revolution (Bill Wilson on BBC) When Chinese investors recently decided to acquire a 13% stake in Manchester City's parent firm, it put the country's renewed interest in football firmly in the spotlight. The world's second largest economy has never been a football powerhouse, qualifying for just one World Cup.
Meanwhile, the population seems more interested in NBA basketball than the sport known in the UK as "the people's game". But over the past couple of years Chinese investors and firms have quietly been acquiring stakes in football clubs in England, Spain, France, Holland and the Czech Republic, while President Xi Jinping has professed a love of the game.
So why are the Chinese now snapping up stakes in European clubs? Reasons include a national desire to look good on the world stage, developing China's club football and national team, creating Chinese football fan bases, and firms using clubs to build their commercial presence in Europe.
Simon Chadwick, chair in sport business at Coventry University Business School, says President Xi has come out as a big football fan, and that by 2025 China wants to have a domestic sports industry worth $850bn. Optimistic estimates put the current entire global sports economy at $400bn.