China funds set to flow into M’sia

By RISEN JAYASEELAN
risen@thestar.com.my

Malaysia recognised as approved investment destination by China

PETALING JAYA: China’s banking regulator has recognised Malaysia as an approved investment destination, paving the way for an inflow of Chinese funds into this country, the Securities Commission (SC) said.

The SC said Malaysia had now become an approved investment destination under China’s Qualified Domestic Institutional Investor (QDII) scheme and thereby joined the ranks of 10 other such recognised jurisdictions.

They are Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, the United Kingdom and the United States.

SC chairman Tan Sri Zarinah Anwar and China Banking Regulatory Commission (CBRC) chairman Liu Mingkang signed letters of exchange in Beijing yesterday to formalise the recognition. CBRC is China’s banking regulator.

Zarinah said in a media statement: “The QDII programme presents a major opportunity for Malaysian capital market intermediaries to gain access to the Chinese market. They should therefore make full use of the opportunity to broaden their reach to this new pool of investors.”

The programme enables Chinese nationals to invest in overseas markets through approved institutions.
The China Securities Regulatory Commission (CSRC) had also confirmed that based on an existing memorandum of understanding with the SC, Malaysia is an approved investment destination under the QDII programme for Chinese fund management and securities companies.

CSRC is China’s capital market regulator.

“With the recognition, approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities, fixed-income products and collective investment schemes approved by SC.

“Such Chinese institutions may also engage the services of licensed Malaysian fund managers to assist with QDII investment matters,” the SC said.

Bursa Malaysia Bhd said the QDII recognition augured well for the exchange.

“It is aligned with our other initiatives such as improving our country classification for the capital market. We also see this benefiting us in terms of enhancing our attraction as a capital-raising platform for foreign companies, particularly Chinese companies.”

Bursa noted that Malaysia was the second Asean country to be recognised as an authorised market for Chinese investors.

Inter-Pacific Asset Management Sdn Bhd chief executive officer Robbin Khoo said this development paved the way for joint ventures and collaborations between Malaysian fund asset managers and their Chinese counterparts.

“Our relationships can now be reciprocal. Market players can now build relationships where each can be directly involved in the other’s market,” he said.

Khoo added that with Malaysia having promoted itself well as an international Islamic finance hub, there should be keen interest from the part of Chinese investors looking for exposure into syariah-compliant investment products.

It is understood that the Chinese government had mandated the QDII programme to get their institutional and other investors to diversify their funds into different asset classes and different parts of the globe.

“Commodity-based securities or derivatives could be a target investment by China, given its increasing bilateral trades with Malaysia,” pointed out a fund manager familiar with the programme.

It is still unclear how much funds will actually flow into the Malaysian market as a result of this development.
It is understood that Chinese authorities have approved its banks and securities-related firms under the QDII scheme to invest up to US$47.7bil so far. However, it is unclear how much of this has been invested in approved markets.

Canada was the last recipient to gain the QDII status in April. Canadian Finance Minister Jim Flaherty had then said in a statement that the recognition would give Canadian financial markets access to up to US$8bil in investment capital.

China makes good on flexibility vow, yuan falls

China makes good on flexibility vow, and shows that floating the currency does not include one-way bets for appreciation

Enlarge image

22/06/2010 17:06

By Jason Subler and Lu Jianxin

SHANGHAI (Reuters) - China pulled back the veil on its new currency regime a little further on Tuesday, appearing to engineer a fall in the yuan to make clear its vow of flexibility did not include one-way bets for appreciation.
Big Chinese state-owned banks kept the yuan in check, a day after its biggest rise since the currency was revalued in 2005, and the Foreign Ministry said change would be gradual, indicating the yuan's appreciation will be far slower than the pace demanded by critics in the West.
The two-way movement in the yuan is not great by the standard of freely floated currencies but is rare in China, where until this week the central bank had squashed intraday volatility via intervention on most trading days.

China has started to relax its control over the yuan ahead of this weekend's G20 summit of world leaders in Canada, breaking a two-year dollar peg that had been a lightning rod for critics who say the currency is undervalued and gives Chinese exporters an unfair trade advantage.

"China has backed up all the talk with action, and President Hu (Jintao) will arrive in Toronto later this week with tangible evidence that China is serious about increasing the flexibility of its exchange rate," said Brian Jackson, strategist with Royal Bank of Canada in Hong Kong.

"We still may see moves in either direction from day to day, but we think the trend in the weeks and months ahead will be for the yuan to make limited but meaningful gains against the dollar."

Under its new freedom, the yuan rose on Monday more than 0.4 percent, the biggest rise in a day since its landmark revaluation in 2005. It also came close to hitting its trading limit of 0.5 percent, an amount the currency can move either side of a reference point set each morning by the central bank.

On Tuesday, the yuan fell just over 0.2 percent.

The fall disappointed many market players, who had initially thought the central bank's decision to set the reference rate in line with Monday's close was a sign that it was willing to let the currency strengthen further.

State-owned banks stepped in to the market by mid-morning and aggressively bought dollars, traders said, suggesting authorities want to control the pace of the yuan's appreciation.

The People's Bank of China, the central bank, made no secret that it would not allow the yuan to appreciate too fast when it announced the currency reform at the weekend.

The Foreign Ministry reiterated on Tuesday that any change in the yuan would come only gradually.

By allowing for greater ups and downs day to day, though, the central bank will move a step closer to its long-stated aim of developing a more mature market in which companies learn to hedge against foreign exchange risks, part of China's overall efforts to develop Shanghai into a global financial centre by 2020.

The central bank signalled another step on the way to ultimately allowing the yuan to become fully convertible on Tuesday, confirming it would expand a pilot programme under which companies can invoice and pay for imports and exports in yuan.

Still, markets and critics in the United States and other countries are unlikely to be easily convinced of the depth of the currency reforms unless they see a significant rise in the yuan.

Markets surged on Monday after Beijing's weekend vow, on optimism a stronger currency would boost the fast-growing economy's purchasing power.

But doubts about the speed of yuan appreciation had already begun to surface in the United States on Monday. Asian stocks then reversed their gains on Tuesday as investors took profits from the rally on Monday.

Commodities also pared their gains, as did commodity-linked currencies like the Australian and Canadian dollars.

HOW FLEXIBLE?

Many economists see China's currency strengthening further in coming days but at a very modest pace, further diluting hopes for big market gains.

A Reuters poll of 33 economists forecast the yuan would rise to 6.67 per dollar by the end the year, a increase of 2.4 percent from late last week before China's policy announcement and similar to the appreciation implied by offshore non-deliverable forwards.

The central bank is likely using a basket of currencies as a reference for the exchange rate, meaning that if other currencies such as the euro start to strengthen again, the yuan could rise against the dollar with them, said Ha Jiming, chief economist for China International Capital Corp in Beijing.

"There's an automatic adjustment mechanism embedded in this policy," Ha told Reuters Insider TV.
"By using a basket of currencies as a reference, it means that when the dollar appreciates against the euro, the RMB could appreciate against the euro as well but may not necessarily appreciate against the dollar. And the opposite is true."

Even with such increased movement expected in the long run, the challenge for China going into this weekend's G20 summit will be to convince other countries that it has made a genuine move to a more flexible currency.

"We're obviously encouraged, but we'll be monitoring the progress," White House spokesman Bill Burton said in Washington. "Implementation here is going to be key, and so we're just going to be keeping an eye on that."
Canada's Prime Minister Stephen Harper made a similar point.

"The proof will be in the pudding over time," he told Reuters in an interview.

"But I think it's fair to say this is a very positive announcement by China. More broadly it does show China not simply doing some positive things, but China assuming a more global view," he said.

(Additional reporting by Koh Gui Qing and Karen Yeung; additional writing by Wayne Cole; Editing by Neil Fullick)

BP chief sails into fresh storm in US after taking time out for yacht race

 By Angus Howarth

EMBATTLED BP chief executive Tony Hayward is at the centre of a new controversy after he went sailing in the face of mounting criticism that he is not doing enough to control the oil spill disaster in the Gulf of Mexico.

• Tony Hayward's yacht, Bob, one of the 1,754 vessels taking part in the 50-mile race round the Isle of Wight on Saturday. Picture: PA

Video: Shelby: Hayward Must Go CBS

BP boss tries to get his life back, but sails into another storm‎ - Sydney Morning Herald 
Critics Knock Wind Out Of BP Chief's Sails‎ - Sky News

The White House led the hostile comment after Mr Hayward spent time relaxing on the Isle of Wight at the JP Morgan Asset Management Round the Island Race.

The crisis that followed the blast on the Deepwater Horizon well, which killed 11 workers, has seen millions of gallons of oil continuing to threaten the Gulf Coast. It is America's worst environmental disaster and has led to tensions between the United States administration and BP. President Barack Obama's chief of staff, Rahm Emanuel, said Mr Hayward had committed yet another in a "long line of PR gaffes" by attending the race while the disaster continued.

He also mocked Mr Hayward's notorious statement on Facebook that he wished the crisis was over so he could have his life back.

Referring to the yachting, Mr Emanuel said: "He's got his life back, as he would say."

He added that the focus should stay on capping the leaking well and helping the people of the Gulf region.

Charlie Kronick, of Greenpeace, was also angry and said Mr Hayward's actions were "rubbing salt into the wounds" of people whose communities have been affected by the catastrophe.

A BP spokeswoman said: "We wouldn't dream of commenting on what the chief executive does in his rare moments of private time." She added he was spending some time with his son.

It is understood Mr Hayward has spent much of the eight weeks since the accident in the US.

BP officials also insisted Mr Hayward was still in charge of the operation to control the spill, amid confusion over his role.

On Friday, company chairman Carl-Henric Svanberg said Mr Hayward had been relieved of day-to-day control of the spill and that BP managing director Bob Dudley would take over.

However, other officials insisted Mr Hayward remained in charge of the operation.

Shadow foreign secretary David Miliband said Mr Hayward's position did not mean he should not be able to spend a day with his son.

But he added: "Does it mean that he does have to lead the company to deal with this fundamental issue that threatens the whole future of the economy? Yes, it does."

Oil giant 'plans to raise $50bn' to help pay for oil spill clean-up

EMBATTLED BP is understood to be working on plans to raise $50 billion (£33.76bn) to cover the cost of the Gulf of Mexico oil spill – more than double the amount previously thought.

Directors at the oil group are said to have approved a scheme last week to raise the money in a bid to ensure they have enough reserves to cover any claims as a result of the disaster.

The figure is more than double the $20bn the group has already agreed to pay into a compensation fund for those affected by the spill, although analysts have warned the final cost of the disaster could be as much as $100bn.

BP is expected to start raising the cash as early as next week through a $10bn bond sale.

It is also understood to be in talks with banks to raise a further $20bn through loans, with another $20bn to be raised through asset sales during the coming two years.

BP has already scrapped shareholder dividends until the end of the year to help pay for the clean-up operation.

The company pointed out that chairman Carl-Henric Svanberg had said last week that the company needed to have "an unusually strong cash position".

The group is reported to be preparing to take legal action against one of its partners, Anadarko Petroleum, after it said it would not cover any of the cost of the clean-up.

BP owns 65 per cent of the ruptured Deepwater Horizon well, while Anadarko has a 25 per cent stake.

Anadarko's chairman and chief executive Jim Hackett said BP's actions probably amounted to "gross negligence or willful misconduct" and that it should foot the whole damage bill.