|Asia News Digest
'China Must Guard Its Banks'
Sept. 17 (EIRNS)China has to be stricter about foreign ownership of domestic banks to ensure its financial stability, wrote Bank of Communications (BoCom) chairman Jiang Chaoliang in the most recent issue of Chinese Cadres Tribune. This is a publication of the Central Party School, the think tank of the Communist Party. The BoCom is China's fifth-biggest bank. Britain's HSBC has a 19% stake in BoCom, and the two banks had discussed HSBC potentially taking a 40% stake if regulators agreed, the Guardian reported today.
But Jiang stated that China has already opened its financial markets too widely, and must maintain the current limits on foreign ownership of domestic banks20% for any single foreign investor, and combined investors cannot exceed 25%. "In future, China should not ease up on the proportion of foreign equity in Chinese banks," he wrote.
China Realizing Gravity of Crisis
Sept. 17 (EIRNS)"The collapse of Lehman Brothers has made the [Beijing] government realize the gravity of challenges that China facessuch an external-reliant (or export and foreign investment-driven) economy. The decision-makers need to shift the focus to promoting growth and protecting employment," the Shanghai Daily quoted Prof. Sun Lijian of Fudan University. "With the vigor of developed markets reeling from the United States subprime mortgage crisis, China can't escape the negative influence with just fiscal policies only," he said.
China Daily today quoted Ma Hongman of Shanghai University of Finance and Economics, saying that while the immediate crisis precipitated by the collapse of Lehman Brothers would have a limited direct impact on China's real economy, the effect on China's macro-economic policy will be very important. Ma said that the "latest adjustment by the central bank suggests a turnaround from the earlier tightened monetary policy to a more positive one."
South Korea, Japan Scramble To Dodge Lehman Bullet
Sept. 15 (EIRNS)As Lehman Brothers was filing for bankruptcy, South Korean and Japanese banks were frantically trying to decide how to protect themselves. South Korean government officials and bank CEOs are holding an emergency meeting tomorrow. On the agenda: the $720 million state investment in Lehman, about $390 million in equity related derivatives issued by Lehman in Korean banks, as well as $318 million in Lehman's securities and loans.
The state-owned Korean Development Bank, whose director was formerly the head of Lehman's operations in South Korea, and who has been trying to buy out Lehman (despite the government's repeated refusal to touch the insolvent wreck), is still at it. KDB announced today that, depending on how the U.S. handles the bankruptcy, they are still interested in buying the remains.
One Japanese bank listed in Lehman's bankruptcy filing was Aozora, which had extended $463 million to Lehman as of July 2. Aozora released a statement: "Whatever may appear in a filing by Lehman in terms of gross exposure will be very different from what we have net of our hedges and net of our collateral."
Others include Mizuho ($382 million), Shisei ($231 million), UFJ ($185 million), Sumitomo Mitsui ($177 million), and Chuo Mitsui ($93 million).
AIG Fallout: Panic Spreads Across Asia
Sept. 18 (EIRNS)AIG was born in China of the investment firm CV Starr, which was founded in 1919, and served on the British side of the U.S. fight against the British over the role of China throughout the 1930s and '40s. AIG, which was formed in 1967, spread across Asia as the leading insurance company there, helped overthrow President Ferdinand Marcos in the Philippines, and much more. With AIG's demise, there is panic spreading across Asia. Here is a snapshot:
* AIG is a 50% partner of China's biggest insurer, China America Insurance Company (with People's Insurance Company of China), and owns 19.9% of PICC. PICC stock tumbled this week.
* American International Assurance (AIA, an AIG unit) was the first foreign insurance company allowed to open up in China, in 1992, and is the largest life insurer in Hong Kong, with 26% of the market and 2 million policies. So far this week, 2,000 policy holders in Hong Kong have cashed in their contracts. Another AIG subsidiary in Hong Kong, American Insurance Underwriters (AIU), is in deep trouble, as many large building contractors have rushed to change their AIU reinsurance policies to other firms.
* In Singapore, where there are 2 million policyholders, the offices were open past midnight yesterday cashing in policies, and had to limit people in the queue to 500 today, so that their employees could get some sleep2,000 cashed out so far. AIA Singapore took out a full-page ad in the Straits Times newspaper today, telling policyholders that it had "more than sufficient capital and reserves to meet all obligations," and that investors' funds were "segregated" from AIG.
* In Taiwan, 1,200 customers have cashed out of AIA.
* AIA is Thailand's largest insurer, with 4.2 million policies. There is no word on cash-outs there, only defensive statements about the company's solvency, but AIG Retail Bank of Thailand, which opened in March 2007, received a $410 million liquidity injection from AIG (amazing how easy it is when Uncle Sam gives you $85 billion).
AIG's PhilAmLife is the Philippines' largest insurer, but so far it is only reporting how safe it is, isolated from AIG.
AIG owns three life insurance and three non-life insurers in Japan, which are reported to be looking for a buyer or buyers.
British Agent Anwar Identifies His Controllers
Sept. 19 (EIRNS)Anwar Ibrahim, the asset of British agent George Soros, is trying to bluff his way into the premiership in Malaysia, claiming he has a list of government members of Parliament who have pledged to jump ship and join the opposition, giving them a majority in the Parliament. With a flair not seen since Sen. Joe McCarthy in the Red Hunt days, Anwar has refused to reveal the list, while making demands for Prime Minister Abdullah Badawi to step down. The Prime Minister has simply called him a liar.
Anwar has no qualms about revealing his sponsors among the world's hedge funds and speculators, and what they expect from him if he were to take over. In a press conference, he protested Badawi's accusation that he has had an "adverse impact on the nation's economy" as being "entirely without basis." He continued: "I have met with the key fund managers in the region, representing over US$1 trillion in assets, and on multiple occasions they were unanimously in support of comprehensive reforms in Malaysia, including judicial independence, a free media, a more professional police force and anti-corruption agency, investor-friendly laws, and assurances on the non-interference of politicians in the governance of Bank Negara. These are policies Pakatan Rakyat [Anwar's party] has promised to implement."