ASIFMA: Asia Regulatory Review | 11 - 18 February 2014

11 - 18 February 2014 | Issue 191 Spotlight Trade Body to Launch Asset Management Group Trade association ASIFMA is to announce the launch of an asset management group to provide a regional voice for fund firms at a regional and global level, AsianInvestor can confirm. Eugenie Shen has been appointed to head the new group, entitled ASIFMAs Asset Management Group (AAMG), which has signed up to 15 members including some of the regions leading asset mangers. (Asian Investor) Institutional investors back HKEx's circuit breaker plan Some institutional investors are supporting the Hong Kong stock exchange's decision to consider introducing circuit breakers to prevent computer-based high-frequency trading programs from causing market disruptions or distortions. Nick Ronalds, Managing Director, ASIFMA - which represents 60 financial institutions including banks and fund managers said: "Based on the experience of other markets, there are many around the world that have introduced circuit breakers to maintain market integrity by preventing price spikes and possible contagion arising from error of an individual trader or trading program." (SCMP) China liberalisation crucial for keepwell deeds The liberalisation of Chinas market is offering hope to an area of finance for mainland groups that has hitherto drawn caution from investors: the keepwell deed. 'While these forms of credit support (keepwell agreements) fall short of onshore credit guarantees, they nevertheless provide a level of comfort for investors' said Vijay Chander, Executive Director for fixed income, ASIFMA. (Finance Asia) ASIFMA Asset Management Analyst ASIFMA is looking for an analyst to join its growing asset management group and support the head of AAMG. Full details can be found on our web site. Applications are due by February 28, 2014. Update CHINA FDI surge reflects confidence in China economy Foreign direct investment (FDI) into the Chinese mainland rose 16.11 percent year on year in January to reach 10.76 billion U.S. dollars, underlining investor confidence in China's economic outlook. The growth rate marked a surge from the 3.3-percent increase in December, data from the Ministry of Commerce showed on Tuesday. (Xinhua) Shanghai FTZ to allow cross-border yuan payment for trade Five third-party payment firms have received the green light to handle yuan-denominated cross-border payment in Shanghai's free trade zone, the Shanghai branch of China's central bank said on Tuesday. The Shanghai Head Office of the People's Bank of China (PBoC) said on Tuesday that Allinpay, 99Bill, China Pay, Dongfang Electronics and Shengpay are now allowed to process cross-border payment in the Chinese currency for cross-border trade in the China (Shanghai) Pilot Free Trade Zone. (Xinhua) PBC targets risky lending China's central bank pledged over the weekend to continue a stable monetary policy this year and urged commercial banks to better manage their liquidity and asset liabilities. China's interbank lending market experienced three major cash squeezes during the past year. Despite the central bank's injection of fresh funds into the market, the liquidity shortage will continue in the near future without major policy adjustment, analysts said. China Central Bank Moves to Limit Risk in Interbank Market China's central bank is taking steps to rein in certain bond-trading activities that could amplify risks in one of the world's fastest-growing debt markets. A division of the People's Bank of China on Thursday published new rules effectively banning banks from using the funds raised from the sale of high-yield investment products for proprietary trading, or trading for its own profit, according to a statement posted on the website of the China Foreign Exchange Trade System, the interbank-trading and foreign-exchange division of the central bank. (WSJ) China Watchdog Said to Tell Small Banks to Set Aside Fund Chinas banking regulator ordered some of the nations smaller lenders to set aside more funds to avoid a cash shortfall, three people with knowledge of the matter said, signalling rising concern that defaults may climb. (Bloomberg) China January Trade Data Accurate, Ministry Says China's higher-than-expected January export data weren't inflated, the Ministry of Commerce said on Tuesday. Worries the monthly figures were distorted by arbitrage-driven false reporting are "speculation and groundless," ministry spokesman Shen Danyang said at a news briefing. (WSJ) China Development Bank Proposes Taking on Sole Local-Lender Role China Development Bank Corp., the nations largest policy lender, is proposing to become the sole financier to local governments as mounting debt threatens efforts to promote urbanization. (Bloomberg) HONG KONG Hong Kong needs to develop global network to maintain its leading role in yuan business Hong Kong must play an active role in developing an international network for cross-border business in the yuan if it is to maintain its leadership in a global market for the currency that could grow by 300 per cent over the next decade, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said. (SCMP) Record of Discussion of the Meeting of the Exchange Fund Advisory Committee Currency Board Sub-Committee held on 9 January 2014 Approved for Issue by the Exchange Fund Advisory Committee on 27 January 2014. INDIA Pre-election budget targets deficit, critics sceptical The finance minister on Monday boasted he had slashed the fiscal deficit lower than his target, while unveiling a pre-election budget that political opponents and analysts said contained unrealistic calculations. Amid uproar in parliament as members of parliament (MPs) shouted him down, Finance Minister P. Chidambaram also announced tax breaks for struggling manufacturers and more money for defence. (Reuters) Chidambaram wants RBI to balance price stability and growth The RBI should strike a balance between price stability and growth when announcing its monetary policy, the finance minister said on Monday, hinting at his unhappiness over its rate hike decisions. (Reuters) Parliamentary panel asks govt to bring fresh Micro Finance Bill A Parliamentary panel has rejected the bill on micro-finance institutions (MFIs) and asked the government to bring a fresh legislation before Parliament. The bill had sought to empower the Reserve Bank to regulate them and fix interest rates ceiling on loans to be provided by MFIs. (Economic Times) Raghuram Rajan bats for technology push for financial inclusion RBI governor Raghuram Rajan made a strong push for India's information and communications technology industry to get more involved in figuring out solutions to improve financial inclusion in the country. (Economic Times) RBI governor Raghuram Rajan expresses concern over Bitcoin RBI governor Raghuram Rajan on Wednesday expressed concerns over the regulation of digital currency Bitcoin, saying the virtual nature of the currency raised questions about how its value would be governed. Rajan said investors and users should exercise caution before using Bitcoin as a consistent means of exchange. (Live Mint) Sebi ushers in strict disclosure norms for mutual funds To ensure more transparency in the mutual funds industry, Sebi today asked the players to make monthly disclosures about their assets under management for different schemes. The measure is part of the capital market watchdog's long-term policy for mutual funds to make them as an attractive investment opportunity for retail investors. (Business Standard) Sebi makes KYC process easier for investors Making Know-Your-Client process easier for investors, Sebi today cleared a proposal to allow various market entities such as brokers and mutual funds to get investor details from centralised KYC agencies, rather than carrying out a fresh KYC verification procedure. Presently, there is an option available to a market intermediary that it may access the centralised KRA (KYC Registration Agency) system in case of a client who is already KYC compliant, or may also carry fresh KYC process. (Economic Times) JAPAN BOJ Boost to Loan Programs Signals Room for More Easing: Economy The Bank of Japan boosted lending programs while sticking with a plan for unprecedented asset purchases, as the central bank tries to support a recovery and stamp out 15 years of deflation. The BOJ doubled a funding tool to 7 trillion yen ($68 billion) and said individual banks could borrow twice as much low-interest money as previously under a second facility. (Bloomberg) Kuroda Urged to Open Lending Spigot After GDP Miss: Japan Credit Japans biggest lenders are urging the central bank to extend a low-interest loan program as soon as today, as a report showed the economy grew at half the forecast pace in the fourth quarter. (Bloomberg) Japan may compromise in TPP farm trade talks Akira Amari, Japan's minister in charge of the Trans- Pacific Partnership (TPP) free trade talks, said on Tuesday that Japan may make concessions over sensitive farm products' tariffs, local media reported. The TPP negotiations will never make progress "if there is no change at all," Amari told a press conference, "I guess no one thinks that all tariff lines will be in status quo." (Xinhua) SOUTH KOREA G20 to discuss policy coordination on emerging market unrest: South Korea Policy coordination in response to the recent turmoil in some emerging markets will likely be among the main topics for discussion at this week's meetings of G20 policymakers, South Korea's Ministry of Strategy and Finance said on Monday. (Chicago Tribune) THAILAND Thai economy posts slower growth in fourth quarter Thailand's economy grew 0.6 percent in the final three months of 2013 compared with the same quarter a year earlier, data showed Monday, as political turmoil hit consumer confidence and tourism. (Channel News Asia) Thai's Govt Savings Bank under-fire for lending funds to rice-pledging scheme Some Thai rice farmers who participated in Thailand's beleaguered state rice subsidy scheme have finally been paid after the Government Savings Bank gave the government a loan. However, that has led to a run on the bank on Monday. (Channel News Asia) MALAYSIA Malaysia grew 5.1% in Q4 Bank Negara Malaysia said fourth-quarter growth was underpinned by strong expansions in manufacturing and services, helping to exceed forecasts of 4.8% growth. The economy expanded 5.6% in 2012. Bank Negara warned that domestic demand may soften as the government cuts back on fiscal largesse but says this will be offset by improving global economic conditions. (Bangkok Post) Malaysia to enhance trade ties with Australia Malaysia will enhance various opportunities in business and investment with Australia after the enforcement of the Malaysia-Australia Free Trade Agreement on January 1 last year. Malaysian Foreign Minister Anifah Aman said he welcomed more Australian trade missions to explore and seek the wealth of investment opportunities in Malaysia. INDONESIA Bank Indonesia facilitates expansion of participation in Mini Master Repurchase Agreement Following the signing of the Mini Master Repurchase Agreement (MRA) by eight Indonesian banks in December 2013, Bank Indonesia has facilitated the signing of phase II of the Mini MRA by 38 banks. With the use of the Mini MRA as a standard agreement, Bank Indonesia hopes that transactions will be easier to execute, market repo lines between banks will become established and the MRA will in time be used for trading with non-bank financial institutions. PHILLIPINES Talks on boosting trade in southern Philippines Boosting the economy in southern Philippines will be among the main topics of discussion between Datuk Seri Najib Tun Razak and Philippines President Benigno Aquino next week. The leaders are expected to exchange ideas to boost trade activities in the region. (The Star) INTERNATIONAL Canada Sees Active Work on Currency Benchmarks Amid G-20 Policy makers including the Financial Stability Board are working actively on the issue of currency benchmarks and the need for alternatives to rates such as Libor, a Canadian government official said today before this weekends Group of 20 meeting. (Bloomberg) FSB to review foreign exchange benchmarks The Financial Stability Board (FSB) has established a new sub-group on foreign exchange benchmarks. The new group will be chaired by Guy Debelle (Assistant Governor, Financial Markets, Reserve Bank of Australia) and Paul Fisher (Executive Director for Markets, Bank of England). The FX Benchmarks Group will undertake a review of FX benchmarks and will analyse market practices in relation to their use and the functioning of the FX market as relevant. Conclusions and recommendations will be transmitted by the FSB to the Brisbane Summit. Call for Brent benchmark reform The head of the worlds biggest oil trading company has called for immediate and far-reaching reform of Brent, the oil marker for more than half of the worlds internationally traded crude oil supplies. The comments by Ian Taylor, chief executive of Vitol, mark the latest intervention in a debate about the effectiveness of Brent, which critics claim is a 'broken' benchmark. Circuit breakers not sufficient, bourses told Stock exchanges need additional volatility limits to prevent wild price swings due to aberrant orders of derivatives contracts, in additional to circuit breakers in cash equity markets. While Asian exchanges are mulling introducing circuit breakers to prevent price spikes and to dampen volatility, industry players say they are not fool proof solutions for stopping aberrant trading algorithms from disrupting the market. (Asian Investors) UNITED STATES Foreign banks braced for Fed rule changes The biggest foreign banks in the US are bracing for new regulatory rules that will govern their structure and demand tougher capital requirements, in a move aimed at helping them withstand a future crisis. (FT) No time to waste on transatlantic trade Michael Froman, the US trade representative, will sit down with Karel De Gucht, his opposite number at the EU, to review the progress they have made towards the goal of sealing a Transatlantic Trade and Investment Partnership. The talks are still at an early stage. The two sides have had just three rounds compared to more than 30 in the negotiations towards TTIPs Asian cousin, the Trans-Pacific Partnership. (FT) EUROPE Euro zone states to focus on bank resolution authority Finance ministers of the 18 euro zone countries gather today in Brussels to advance negotiations on the Single Resolution Mechanism, amid disagreements between states and the European Parliament on the details of Europes proposed new bank resolution fund. (Irish Times) Taper tensions, ECB tests to keep banks deleveraging in emerging Europe Banks are likely to keep cutting lending to central and eastern Europe this year, under pressure from an asset review and emerging market tensions, according to a group set up to avert a capital drain from the region. A new report by the International Monetary Fund and other 'Vienna Initiative' institutions showed that market volatility and global borrowing costs meant Western banks had further scaled back positions in emerging Europe between June and September last year. (Reuters) ESMA asks Commission to clarify derivative definition under MiFID/ EMIR ESMAs letter says that currently this definition is not harmonised across the EU which could have a detrimental effect on the consistent application of EMIR. The EMIR definition of derivatives cross-refers to the list of financial instruments mentioned in the current Markets in Financial Instruments Directive (MiFID). The different transpositions of MiFID across Member States mean that there is no single, commonly adopted definition of derivative or derivative contract in the European Union, thus preventing the convergent application of EMIR. ESMA consults on Guidelines for issuers performance measures The European Securities and Markets Authority (ESMA) has launched a consultation on Guidelines on Alternative Performance Measures (APMs). The aim of the guidelines is to encourage European issuers to publish transparent, unbiased and comparable information on their financial performance in order to provide users with a better understanding of their performance. EU law on market benchmarks faces delay for months European Union rules to regulate financial benchmarks like Libor will probably be delayed for months, a senior lawmaker said, because a key vote next week is likely to be postponed. (Reuters) Germany, France seek to revive transaction tax plan Germany and France will lead a face-saving bid this week to revive a flagging project to tax financial transactions in 11 euro zone countries and allay fears it could hamper economic recovery. (Reuters) Merkel and Hollande to discuss European communication network avoiding U.S. German Chancellor Angela Merkel said on Saturday she would talk to French President Francois Hollande about building up a European communication network to avoid emails and other data passing through the United States. (Reuters)