Month: February 2014

Why India’s key inflation gauge is losing its punch

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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When India releases its wholesale price index (WPI) later on Friday, the closely-watched inflation number may not have the same resonance for local markets as it once did.

That`s because recent comments by the Reserve Bank of India (RBI) suggest the central bank is now placing a greater emphasis on the consumer price index (CPI) when it comes to setting monetary policy.

“It is the right thing to do,” said Frederic Neumann, co-head of Asian economic research at HSBC. “Ultimately the goal of central banking is to anchor inflation expectations and therefore targeting the CPI is a more relevant measure of actual prices that consumers face on a day-to-day basis.”

Inflation in India, struggling with sluggish economic growth, is down from double-digit rates seen last year but remains stubbornly high. That means it`s likely to be a hot topic in this year`s national elections.

In India, the CPI was introduced in 2011 and is a relatively new indicator.

“CPI has traditionally been the measure that most central banks would want to look at,” said Rahul Bajoria, a regional economist at Barclays. “In the case of India, the only reason the WPI was watched more closely than the CPI is that it had more data and came out in a timely manner.”

Economists say recent comments by new RBI Governor Raghuram Rajan suggest the central bank is now looking more closely at the CPI measure.

So what?

And what does that mean for India`s rate outlook? In short, say analysts, the CPI remains at what they describe as “elevated levels” and that suggests a tightening bias is likely to remain in place for now.

In January, the RBI lifted interest rates for the third time since September to help contain price pressures.

“We believe the next move is more likely to be up than down, particularly as Governor Rajan begins to focus on the task of bringing headline consumer price inflation down to 6 percent by early 2016,” Robert Prior-Wandesforde, director for non-Japan Asia economics at Credit Suisse, said in a note.

HSBC`s Neumann said he also anticipated another rate hike in the months ahead. The RBI next meets in April.

As for the WPI, analysts added they would continue to pay attention to the indicator. It is forecast to rise 5.8 percent in January from a year earlier, according to economists polled by Reuters, compared with a 6.16 percent increase in December.

“Everyone still keeps a wary eye on the WPI as it has been the relevant indicator for some time, but the CPI is now the indicator to watch,” said Neumann.

–By CNBC`s Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold to scale new heights, technicals suggest

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gold appears to be regaining favor with investors, rallying 5 percent over the past two weeks, and gains look set to continue in the near term driven by a strong technical picture, according to ANZ.

“Gold has managed to break through – and hold above – some key resistance levels over the past few weeks. A rally above USD 1,308 per ounce could target USD 1,365,” Victor Thianpiriya, commodity strategist at ANZ, who sees gold rising to USD 1,450 by year-end, wrote in a report published on Friday.

Gold held above USD 1,300 on Friday and looked set to post its biggest weekly gain since October as US data raised concerns about the outlook for economic growth.

In addition to technical factors, sentiment among long and short-term investors appears to be turning more positive, he said.

Speculators have covered short positions, pushing the net longs in Commodity Exchange (Comex) to a three-month high while gold holdings in physically-backed ETFs are increasing.

In the week to February 4, speculative net long positions in Comex stood at 89,000 contracts – an increase of 24 percent from 72,000 a fortnight prior.

Meanwhile, gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, said its holdings rose 7.50 tonnes to 806.35 tonnes on Thursday – its biggest inflow since late December.

One key factor that may determine the sustainability of the rally, however, is whether Chinese physical demand will wane with higher gold prices.

“While these factors argue for a higher price, we are cautious that a rally to the mid-1,300`s can hold in the near term as Chinese demand is likely to taper off,” Thianpiriya said.

Nevertheless, ANZ says that its expectation of a gold recovery to USD 1,450 by end-2014 remains intact.

“China is expected to remain the driving force behind global physical gold demand, maintaining its position as the world`s top consumer for the second year in a row. We expect this demand will more than offset the weight of physical gold selling by exchange traded funds in the long term,” Thianpiriya said.

“Indian demand could also surprise on the upside…some relaxation of the import restrictions imposed last year seem to be in the offing, though we view a full lifting of import controls as unlikely,” he added.

Market watchers, however, remains divided over the prospects for the precious metal, with Goldman Sachs` chief commodity strategist Jeffrey Currie reiterating his forecast for gold to fall to USD 1,050 over the next 12 months.

“Our US economists continue to expect strong growth in 2014 coupled with low inflation and as a result we forecast further downside for gold prices in 2014 with an end of year target of USD 1,050 per ounce,” Currie wrote in a report this week.

“However, we believe that the path will be more of a slow grind lower over the course of the year unlike last year as markets will wait for strong economic data to confirm that U.S. economic growth is accelerating and that the Federal Reserve will continue to reduce the accommodative monetary policy,” he said.

Additionally, he said the potential for further emerging market currency depreciation in countries could impact demand given the price sensitive nature of jewelry demand in local currency terms.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Emerging market turbulence to be short-lived: DBS CEO

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Turbulence in emerging markets stemming from the Federal Reserve‘s decision to scale back its stimulus program will be short-lived, said Piyush Gupta, CEO of DBS, Southeast Asia`s biggest bank.

“There may be some short-term turbulence as short-term hot money leaves the region, but over the course of the year I think [emerging markets] will do fine,” Gupta told CNBC on Friday.

Gupta says inflows from the Fed`s third quantitative easing (QE) program into the region were not as high as many believe.

“If you think about the entire QE3 – our economists suggest that 85 percent [was] fed back into the Fed`s coffers. The actual inflows of money that came over to the emerging markets were not that substantial,” he said.

“If you look at mutual fund flows into Asia into the last 18 months, they have not been great. In fact they`ve been limping or going out. So there is some hot money, but the implied impact of that is overdone,” he added.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Lovers with deep pockets: This for your valentine?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Still in search of a Valentine`s Day gift for that special someone?

For lovers with deep pockets, you may want to consider treating your Valentine to a night at one of the world`s most exclusive hotel suites – but a word of caution: it could set you back a full year`s salary.

The Royal Penthouse Suite at the Hotel President Wilson in Geneva, Switzerland has topped a new ranking of the world`s most expensive hotel suites by ultra-high net worth intelligence firm Wealth-X.

The list, published on Wednesday, was compiled on the basis of average price per night, with one suite per city. Taste, style and exclusivity were then taken into account when evaluating the shortlist.

A night at the majestic suite that spans 1,800 square meters – with 12 luxury rooms, a Steinway grand piano, a billiards table and a private gym – and overlooks the spectacular Lake Geneva and the Alps, will cost you a cool USD 67,000.

While this high level of opulence may not be accessible to the 99 percent, there is a market for these luxurious hotel rooms.

“For the world`s most demanding ultra-wealthy individuals, only the best will do, regardless of cost,” said Tara Loader Wilkinson, editor in chief at Wealth-X.

In the number two spot was the Ty Warner Suite at the Four Seasons Hotel in New York City.

While the 400 square meter suite has just one master bedroom, it boasts floor-to-ceiling windows that offer a 360-degree view of the city with top-of-the line fittings from calfskin leather walls in the dressing room to semi-precious stones in the “Zen room.”

Guests also enjoy a 24-hour butler service, a Rolls-Royce chauffeur, an art concierge and a personal trainer. All this comes at a grand price tag of around USD 41,000 per night.

Placing in third and the most exotic of lot is the Hilltop Estate Owner`s Accommodation, Laucala Island Resort, Fiji. Laucala Island is a private island ringed by turquoise water and white sandy beaches.

Located on the hilltop overlooking the entire island, the property features three individual villas – two of which have their own private swimming pool – and outdoor dining pavilions to experience alfresco dining under the stars. But it`ll cost you, with one night totaling USD 40,000.

Billed at USD 37,500 a night, the Penthouse Suite at the Grand Hyatt Cannes Hôtel Martinez in Cannes, France, ranks in fourth place.

It is by far the smallest of the top 10 at 180 square meters, but packs a lot in with two-bedrooms and a private terrace with a jacuzzi that grants fabulous views of the Bay of Cannes.

Finally, ranking fifth is The Royal Villa, Grand Resort Lagonissi in Athens, Greece at USD 35,000 a night.

Located on a lush green private peninsula, the 410 square meter, two-bedroom villa has an outdoor and indoor pool (heated on request), heated floors, remote controlled mattresses and curtains, a business center, a private path leading to the beach, and a butler`s room, of course.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Can Singapore safely deflate its housing market?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Singapore`s famously efficient government faces a challenge that has stymied many a country before: safely guiding its toppish property market to a soft landing as interest rates rise.

Property prices in the city-state have surged over 60 percent since 2009, propelled by rock-bottom global interest rates and quantitative easing in developed economies, even as Singapore`s government has enacted a series of cooling measures to prevent a bubble from forming.

(Read more: A risky year for the global property market? )

But the prospect of rising interest rates as the US Federal Reserve begins tapering its asset purchases has spurred fears that Singapore`s property market could be headed for a crash as higher mortgage payments could spur forced selling and defaults.

This week, Singapore indicated the specter of forced selling remains a serious concern, with the central bank, the Monetary Authority of Singapore (MAS), relaxing one of its cooling measures, the Total Debt Servicing Ratio, or TDSR. The measure aimed to ensure that buyers` monthly payments do not exceed 60 percent of their income, so they wouldn`t be caught out by a spike in interest rates. Most mortgages in Singapore have adjustable, rather than fixed, rates.

(Read more: Singapore home price fall sets bearish tone for 2014 )

The government now allows an exception for borrowers who took out their loan on their home before the TDSR was introduced last year and who need to refinance as their payments rise.

“These exemptions will reduce the incidence of TDSR-imposed fire sales and lower the risk of a property market collapse,” David Lum, a property analyst at Daiwa, said in a note, adding the exemption could prove crucial as it will insulate owner-occupied homes from the pressure.

“This should help to reduce possible systemic risk from the TDSR, or any blind application of policy thresholds,” he said, adding that the latest steps likely indicate the TDSR has been the most-effective cooling measure.

(Read more: Are Singapore home prices set for a bruising? )

The MAS estimates around 5-10 percent of Singapore`s borrowers have a monthly debt-servicing burden that exceeds 60 percent of their income, with that percentage potentially rising to 10-15 percent of borrowers if mortgage rates rise by 300 bps.

Keeping those households from dumping their properties into an already slowing property market is likely key to keeping an even economic keel in the city-state.

The consequences of getting it wrong on efforts to guide the property market to a soft-landing can be both long-lasting and high. While much of the US housing market has shown significant recovery only five years after the Global Financial Crisis, Singapore`s property market didn`t fare as well in the wake of the crash during the Asian Financial Crisis in the late 1990s.

(Read more: Economist defends Singapore bubble claims )

It wasn`t until 2009 that the city-state`s private residential property prices returned to their 1996 peak level, according to the government`s property price index data.

Others also believe the latest steps, which aren`t likely to affect new sales, will help prevent a meltdown.

Without the changes, “stressed” households with TDSR ratios above 60 percent would be “held to ransom” by lenders as payments rose without the option to refinance, Citigroup noted.

(Read more: When will Singapore roll back property curbs? )

“This ensures a softer landing for such `stressed households` as well as `fringe households` (40-60 percent TDSR, which form one in five borrowers), whose debt servicing burden could deteriorate upon any adverse changes in their household cashflows,” Citigroup said in a note.

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

 Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Are EM companies the real debt worry?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Emerging markets have convulsed recently amid concerns about government balance sheets, but investors may want to worry more about corporate ones instead.

Dramatic falls in the currencies of countries such as Argentina and Turkey have triggered widespread selling across the emerging markets with the “Fragile Five” – India, Indonesia, Brazil, Turkey and South Africa – among the worst hit.

But fears of a traditional emerging market sovereign crisis may be misplaced.

“The ordinary precursor measures of a crisis such as current account deficits, foreign-exchange reserves, exchange rate valuations and government debt-to-gross domestic product (GDP) might be misleading on their own,” the investment bank Jefferies said in a note Wednesday.

(Read more: Will emerging markets become a euro zone-style risk?)

“It is maybe the repayment schedules of borrowers that matter most.”

The bank noted that there has been a far greater amount of corporate bond issuance in emerging markets than equity issuance, rising to an estimated 1.19 percent of GDP in emerging markets as a whole, compared with only around 0.69 percent in 2010.

Even as data from the Bank of International Settlements (BIS) show emerging markets’ international corporate bond issuance rose to around USD 335.6 billion in 2013 from USD 151.5 billion in 2010, the average credit quality has been deteriorating, it said.

(Read more: Rout overdone, emerging markets to ‘turn’ this year)

Indeed, the BIS noted in a working paper that while many emerging market governments have avoided the mistakes that spurred previous crises by issuing debt in their own currencies, rather than in dollars, companies have been expanding their credit issuance into international markets.

This growth over the past few years raises concerns that companies are increasing their exposure to foreign-exchange risks, the BIS said.

As developed markets begin to raise interest rates and dial back quantitative easing over the next few years, “downward pressures on some emerging market currencies could be accentuated, increasing the local currency cost of servicing dollar debt,” the BIS paper said.

It also noted that maturing obligations could force companies to borrow in their local currency to pay down foreign-currency debt, potentially further dampening emerging market currencies and complicating monetary policy decisions.

(Read more: What happens in EM stays there, mostly: Goldman)

Emerging market equities appear to have stabilized over the past week or so after their sharp selloffs, but risks may persist.

“While the problem of emerging market offshore borrowing may affect exchange rate and central bank interest rate policies initially, equities are more likely to be affected by refinancing risks and ultimately borrower solvency,” Jefferies warned in its note.

—By CNBC.Com’s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Does China plan to use gold to internationalize the yuan?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Concerns about high debt and an overvalued currency are sucking gold imports into China, according to a new report from Lombard Street Research.

It adds that the authorities may possibly be moving in the direction of using gold in a plan to make the yuan an international currency.

Beijing has said that it does not view gold as a useful asset for diversifying the country’s USD 3.8 trillion worth of foreign exchange reserves, according to media reports.

(Read more: China posts blowout trade data, exports jump 10.6%)

China’s official reserves of gold stand at 1,054 metric tons, that’s worth about USD 45 billion. This figure has not been updated since 2009 and Lombard says the number may not be accurate because since that last update imports of gold and domestic production amount to over 4,500 metric tons.

 “The massive flow of gold into the country does make it seem plausible that they [China’s authorities] could be moving in the direction of using gold in the effort to internationalize the currency and escape what is seen as a domineering dollar,” Lombard economist Freya Beamish said in a note published late Wednesday.

(Read more: Yuan now one of the world’s most tradable currencies)

In fact, latest official data shows that China imported and produced more gold last year than its consumers bought, fueling speculation that the authorities took last year’s dive in the price of gold to build up holdings of the precious metal. Gold prices fell 28 percent last year.

“I wouldn’t be surprised if import numbers hold up as there was some evidence that that Chinese were buying a lot of metals near their lows last year,” Sean Darby, chief global equity strategist at Jefferies, told CNBC. He was referring to data on Wednesday that showed China’s imports rose 10 percent in January, from the year-ago period, while exports jumped an annual 10.6 percent.

 The yuan traded around 6.0657 per dollar early on Thursday. It has steadily been appreciating since it was unpegged from the greenback in 2005 and had strengthened about 25 percent since then.

In recent years, the yuan has gained ground as a global currency as Beijing eases its control of the yuan – also known as the renminbi – and opens up China’s financial markets to foreign investors.

According to Lombard, gold imports from Hong Kong took off in 2011, when it estimates the yuan first entered overvalued territory.

(Read more: China’s 500-tonne gold gap fuels talk of stockpiling)

“Not only does renminbi overvaluation make it directly sensible for Chinese investors to dump the currency in favor of gold, it also brings Chinese liabilities into question in general,” Beamish said.

“With the renminbi this overvalued, China now seems incapable of growing without debt injections and that is a situation that can only end in crisis or renminbi depreciation or some combination thereof. Gold is a natural hedge in any of those scenarios,” she added.

-By CNBC’s Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Can Asia’s low-cost carriers go the distance?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As competition between budget airlines heats up, the appeal in going low-cost for the long-haul appears to be growing.

The long-distance unit of Air Asia, a Malaysian budget carrier, is close to unveiling plans for an offshoot that connects Bali to Hong Kong, Australia and Japan, the Wall Street Journal reported last week.

(Read more: Singapore Airshow 2014 )

The development is not one confined to Asia. Norwegian Air Shuttle, which focuses on low-cost flights within Europe, is planning to expand its model to the US and Asia, according to recent media reports.

Analysts say that while budget airlines have largely focused on generally short flights, they are starting to target long-haul routes to take advantage of price-conscious consumers.

Singapore Airlines subsidiary Scoot for instance only focuses on medium-to-long haul flights.

It says the aircraft used is the key to doing low-cost, long-haul travel well.

“One of the great secrets is the aircraft,” Scoot CEO Campbell Wilson told CNBC this week.

“When you`re flying distances of five hours or more, you`re using a wide body aircraft, a 777 or 787,” he said. “It`s a completely different ambiance on board, more lavatories for one, so it`s a very different experience than flying on a short haul LCC (low cost carrier).”

(Read more: New Dreamliner fleet `game changer` for Scoot: CEO )

In December AirAsia announced an order for 25 Airbus A330-300 aircraft in a deal valued at USD 6 billion. The company said it was a bid to set up a low-cost equivalent to carriers such as Emirates.

For some bigger airlines, competition from budget airlines going long-haul is not a major concern.

“We are already very low cost. We are about 20 percent less expensive than some of the major airlines,” Temel Kotil, Turkish Airlines CEO told CNBC on the sidelines of the Singapore Air Show this week. “Our product is very good, our costs are low – we work 24 hours a day, use new technology, optimization, that brings costs down.”

And using technology effectively to contain fuel costs is key for those budget carriers expanding into long-haul travel, analysts say.

“As we see some of the low-cost carriers move into long-haul flights, some of the solutions we`ll provide that is of interest is the GX Aviation system, which allows people to stay connected on long-haul flights,” said Brian Davis, vice president, Asia-Pacific at Honeywell Areospace, on the sidelines of the Singapore Airshow.

“Products that help fuel efficiency for instance are also key to their [budget airlines] strategy so they can maintain a competitive environment,” he added.

Going long-haul is certainly not without its risks, as Air Asia knows. It suspended flights to Europe during the global financial crisis.

(Read more: `Full-fledged` war awaits India airline sector )

Competition

The environment is certainly a competitive one for budget airlines operating in Asia right now.

Nearly all of Asia`s premium carriers are investing in budget airlines.

Taiwan`s China Airlines and Singapore`s Tiger Airways plan to set up a Taiwan-based budget carrier, while Scoot plans to establish a new Bangkok-based low-cost carrier with Thailand`s Nok Airlines.

According to consulting firm CAPA Centre for Aviation, budget carriers now account for more than half of the passengers within Southeast Asia, including domestic and international passengers flying between the 10 ASEAN countries.

(Read more: Overcapacity a threat to airline sector: Garuda CEO )

“When you look across the developed world, about 26 percent of domestic seats are typically attributable to a low-cost carrier,” said Davis at Honeywell. “But in four key countries in the Asia-Pacific – Thailand, Indonesia, Malaysia and the Philippines – we see well over 55 percent of the seats in those markets are already dedicated to low cost carriers.”

For others, the competition between airlines in Asia can only mean one thing: consolidation.

“There is going to be a consolidation. You see it right now in Indonesia – some airlines are closing their routes and that`s how the market will react,” Emirsyah Satar President and CEO, of Indonesia`s flag carrier Garuda told CNBC this week.

–By CNBC`s Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China is now cheaper than Turkey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China was among the casualties of the recent relatively indiscriminate selloff in emerging markets, leaving its shares cheaper than laggards Turkey and Argentina and potentially opening a bargain buying opportunity.

“With an estimated 2014 P/E (price-to-earnings ratio) of 8.1, China is cheaper than Turkey, whose economy is in a tailspin. With China`s industrial profits growing at a robust 12.2 percent year-on-year, this makes no sense to us,” David Goldman, managing director at global financial services group Reorient, said in a note.

“That makes China the cheapest major market in the world on a forward-looking P/E basis (and the cheapest it`s ever been),” he said.

(Read more: Rout overdone, emerging markets to `turn` this year )

China shares have been trading like an emerging market index, he noted. “That can`t be right. A great deal of the emerging market index reflects commodity exporters who have suffered in the deflationary headwinds, while China benefits from lower raw materials prices.”

Indeed, some are predicting a big jump in China equities. JPMorgan expects a 15-20 percent rebound, to an implied 10 times earnings, in coming weeks as focus shifts to two key political meetings which should kickstart the country`s reform agenda.

Others have also noted a disconnect between China shares` performance and its relatively stable economy.

“It appears that the market believes that China`s economic situation has deteriorated by as much as those in Argentina and Turkey in recent weeks,” Jun Ma, chief economist at Deutsche Bank, said in a report. “This market perception of China is wrong.”

(Read more: Are markets headed for a perfect storm? )

He noted the China H-share index has fallen by 16 percent since the beginning of December, nearly as much as Turkey`s 22 percent fall in US dollar terms and Argentina`s near 20 percent decline and topping Brazil`s 12.7 percent fall.

But those countries` declines were triggered by factors that don`t apply to China, he said, with their currencies depreciating sharply amid concerns of fund outflows as the US Federal Reserve began to taper its asset purchases. In addition, other emerging markets face concerns such as high inflation, fears of external debt crises and political instability, he noted.

“We strongly believe that China`s economic fundamentals are much healthier than most other emerging markets and China is one of the least vulnerable emerging market economies to US tapering,” Ma said.

China`s yuan has been among the most stable emerging market currencies in the past few weeks and it`s likely to remain stable this year, he said, noting that in the period from December 1 to February 5, the yuan gained 0.5 percent against the US dollar while Argentina`s peso fell 22 percent and Turkey`s lira shed 8.6 percent.

(Read more: Why you don`t need to cry over Argentina )

“The renminbi should remain one of the most resilient to external shocks in 2014, given that its capital account is still largely controlled for portfolio flows, and macro fundamentals are very supportive of its currency,” Ma said, adding Deutsche Bank still expects it to appreciate by about 2 percent against the US dollar this year.

To be sure, China`s economic data have shown some deterioration recently and there are concerns about bad debt in its banking system.

“Private sector credit in China has grown more rapidly than you should be comfortable with in an emerging market normally,” Daniel Martin, an economist at Capital Economics, told CNBC.

“One thing that`s certain is it can`t carry on having credit growth the way that it has been. Credit growth has to slow that means the economy has to slow,” he added.

(Read more: Is copper`s swoon a bad omen for China? )

Recent data show the economy is indeed slowing. China`s gross domestic product (GDP) expanded at a rate of 7.7 percent last year, its slowest rate since 1999. In addition, the official manufacturing purchasing managers` index fell to 50.5 in January from 51.0 in December.

But even so, it`s not clear this should overly concern investors.

“This is a process that has to happen and it means China`s economy will be more sustainable in the long term. These moves, even though they slow the economy, they make it safer,” Martin said. “The panic over some bad data that came out of China in January is probably well overdone,” he said. “We feel like China can at least avoid the hard landing scenario.”

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bad jobs reports won’t change tapering: Janet Yellen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Recent weak employment reports haven’t been enough to sway the Federal Reserve from reducing the pace of its monthly stimulus program, Chair Janet Yellen said Tuesday.

In her first public remarks, delivered to the House Financial Services Committee, Yellen said the central bank does not look at economic reports in a vacuum when determining its policy course.

“We have to very careful not to jump to conclusions interpreting what those reports mean,” she said. “There were weather factors. We’ve had unseasonably cold temperatures that may be affecting economic activity in this job market and elsewhere.

“The (Open Market) Committee will meet in March. We will have a broad range of data on the economy to look at, including an additional job report,” Yellen added. “I think it’s important for us to take our time to assess what the significance of this is.”

(Read more: Yellen sees better economy, less money printing)

The economy has been hit with consecutive weak nonfarm payrolls numbers, with just 75,000 new positions added in December and 113,000 in January. Both reports came after the Fed announced in December that it would begin paring back its then-USD 85 billion a month in purchases of Treasurys and mortgage-backed securities. The Fed has reduced the purchases to USD 65 billion a month.

Still, Yellen said she believes the economy is in a sustainable economic recovery, though she noted she was “surprised” by the weak jobs data.

Yellen defended the central bank’s policy course, saying the central bank was trying to be as consistent as possible considering the difficulty of the task at hand.

Recent job market weakness, Yellen said, hasn’t been enough to sway the Fed from its course in reducing the pace of its monthly asset purchase program.

(Read more: ‘This isn’t your father’s Fed’: GOP congressman)

As the unemployment rate drifts toward the Fed-set threshold of 6.5 percent it had set in December 2012 for when it would consider raising interest rates, Open Market Committee officials have indicated that the target likely won’t hold.

In her first public comments since taking the Fed’s top position, Yellen told the House Financial Services Committee that the times have called for unusual policy moves.

“I have always been in favor of predictable monetary policy that responds in a systematic way to shifts in economic variables,” she said. Yellen called herself a “sensible central banker” but called the economic circumstances since the financial crisis “very unusual times.”

“We are attempting through our forward guidance to be a systematic and predictable as we can possibly be,” she said.

Yellen delivered her first public remarks to Congress on Tuesday, earlier pledging a steady course in which the central bank would continue unwinding its stimulus program so long as economic progress allowed.

Lawmakers tossed a variety of questions at Yellen, none particularly hostile though the central bank’s economic engineering has been the subject of considerable debate over the years since the financial crisis hit.

Questioned about high levels of minority jobless rates, Yellen said Congress needs to do its share of the heavy lifting to accelerate the recovery. The Fed is charged with a dual mandate: maximum employment and price stability.

“Monetary policy is not a panacea, and I think it’s absolutely appropriate for Congress to consider other measures you might take in order to foster the same goals,” she said.
In prepared remarks, Yellen tipped her hat to predecessor Ben Bernanke, whom she said “helped make our economy and financial system stronger.”

She also cited a “pickup in economic activity” but said more needs to be done before the Fed ends quantitative easing completely and begins raising interest rates.

—By CNBC’s Jeff Cox. Follow him on Twitter
@JeffCoxCNBCcom
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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow