Friday, April 24, 2009

China vs United States: A visual comparison

All pictures from

China's gold reserves growing, and fast... What does it mean?

China's gold reserves have nearly doubled over the past five years, according to the country's foreign exchange administration.

At the moment China holds about 1000 tons of gold, up from 600 tons in 2003 according to Hu Xiaolian who is head of the State Administration of Foreign Exchange (SAFE). Take note, the last time China released such information was in 2003, so this is not exactly a every day occurrence.

Definitely big news, especially for the United States which at the moment is the major beneficiary of China's massive foreign exchange reserves, most of which are held in U.S Dollar denominated assets.

“China still has only a very small percentage of its forex reserves held in gold, much less than the United States or other developed countries,” said Paul Atherley, Beijing-based managing director of Leyshon Resources. “Those holdings are still too low in terms of the size of its economy and the growing significance of its currency.”

At the moment, China's total gold reserves only account for roughly 1.6% of its entire accumulated FOREX reserves. The total value of its gold holdings are currently reported as $31 billion (211.6 billion yuan).

Furthermore, according to this FT article the move coincidentally comes as many European central banks are selling their gold and as the International Monetary Funds discusses selling a considerable portion of its own gold reserves.

“This is probably the most significant central bank announcement since the Central Bank of Russia announced at the LBMA gold conference in Johannesburg in 2005 that it wanted to hold 10 per cent of its foreign exchange reserves in gold,” said John Reade of UBS.

Check out this chart of how gold has performed over the past five years.

Gold has traditionally been viewed as a store of value and a safe heaven for wealth in volatile times, and these are indeed volatile times.

China recently hinted that it would like in a perfect world that the global economy adopt a single currency. The Political Satire, the Daily Show articulately described in last nights episode, this is just not going to happen (Note the link provided takes you to a video from last nights episode that contains some questionable language).

In reality it is hard to believe China legitimately thinks the United States would consider adopting a single currency. What China was really aiming to do was send a message that the United States better make sure that it not only pays back all the money China has lent it over the years but that it also pays it back at a premium.

If inflation goes through the roof because of low interest rates and the massive amounts of money the United States is printing, China is going to be paid back in a very devalued currency, and this will make for a very unhappy China.

Recent headlines relating to China's planned gold purchases sends yet another clear message to the United States.

"Make sure you get your house in order!"

China's FOREX reserves have grown from $623 billion at the start of 2005 to a whoppin' $1.906 trillion at the end of September of 2008. Growth however did slow tremendously in the first quarter of 2009, growing a mere $7.7 billion.

With its current stock of 1000 tons of gold, China has the fifth largest holdings of gold in the world. Hou Huimin, vice general secretary of the China Gold Association suggested in his opinion China should build it reserves to 5,000 tons.

One thing is clear, China is going to be very careful where its stores it wealth in the coming years.

Thursday, April 23, 2009

Esteban Colberto live from Trinidad and Tobago

Hilarious clip from last nights Colbert Report on Comedy Central. If you are a international reader or simply someone who is not familiar with Stephen Colbert I would like to point out that he is the host of a show that is a political satire.

Please watch with a open mind and realize he is being sarcastic...

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Summit of All Fears
Colbert Report Full EpisodesPolitical HumorGay Marriage Commercial

If you make it to the end of the video he does a very funny little bit on the US demand for drugs. Worth your time watching.

Does anyone really care what the IMF thinks?

Apr 22 (Retuers) - For the first time since the end of World War II, the International Monetary Fund is projecting that the world economy has fallen into a severe recession.

IMF statistics are widely used when proving a point in journalism, academic research or any other type of report. There are a handful of sources to turn when you need a legitimate source and the IMF's wonderful website is one of them.

It's full of statistics, economic research, news and pages dedicated to just explaining to you what the heck the IMF does... sounds like a exhilarating experience no?

There is already a raging debate among academics, economists and politicians if the good produced by the IMF outweighs the bad.

You don't see IMF economists, moving markets with their speeches on major news networks.

This is because they don't and they can't. When it comes down to it the IMF has true little power to influence momentum in markets. Financial markets don't care about what the chief economist at the IMF thinks or says because anyone in the business probably has a research department in their company that has already come to the same conclusion. Heck, I could have Googled what these IMF guys said in this Reuters video.

Wednesday, April 22, 2009

Investors hopeful for a recovery in Natural Gas

A year ago people there was hysteria because of sky rocketing energy and commodity prices. In this analysis I focus on Natural Gas, which last summer reached a record setting high of $13.69 a million British Thermal units.

Things have changed (as you can see in the graphs below. The global economy now finds it self in the middle of a world wide economic crisis. Expensive commodities are the least of the world's problems right now.

Natural Gas Prices - 3 months

Natural Gas Prices - 12 months

So does this present a investment opportunity?

It definitely does, albeit one with a fair amount of risk... Commodity prices not withstanding, the fact remains that without commodities there would be nothing to fuel the global economy. Eventually when macroeconomic demand for goods and services pick up around the world so too will demand for energy.

However, how do you go about picking the companies that stand to benefit from a potential rebound?


1. Companies with low debt and viable growth plans. Try do your homework so that the companies you choose fit your time line and expectations on when natural gas prices will recover. You don't want to choose a company exploring for the largest deposit of natural gas in Brazil only to find out it won't be extracting and selling the gas until 2015.

2. Look for natural gas producers with operations in NORTH America. As this Dow Jones Newswire article articulates, "Domestic gas producers that learned how to tap natural gas trapped in rock formations known as shales and that have enough credit or cash to survive the current lower price environment are expected to benefit the most from the possible in surge prices."

Greater than you thought!

Apr 21 (Reuters) - The most technologically advanced survey ever made of China's Great Wall finds the iconic structure thousands of kilometers longer than previously estimated.

The wall has been confirmed at roughly 9000km, a full 3000km longer than the previously estimated 6000km.

Microfinance in focus: Bolivia's MFI sector set for slower but solid growth in 2009

Bolivia's microfinance sector remains in a good position to cope with the economic slowdown and is set for slower but solid growth this year, the executive secretary of Bolivia's microfinance institutions' association Asofin, Fernando Prado, told BNamericas.

"Fortunately, we haven't felt the [financial] crisis in the microfinance sector in Bolivia," said Prado, speaking on behalf of the eight microfinance institutions associated with Asofin, which control 90% of the total loans held by the country's specialized microlenders.

In 2008, Asofin members expanded their loans 42%, three times the rate reported by banks, which grew lending by 14%.

While banks have seen demand for their products decline, demand for microcredit remains very high, Prado said.

Click here to access this article from BNAmericas

Asia News Wire

India's central bank cuts key rates by 25 basis points -- ChannelNewsAsia

MUMBAI: India's central bank on Tuesday lowered two key short-term interest rates by 25 basis points each, in an effort to arrest a slowdown in Asia's third largest economy.

The Reserve Bank of India (RBI) lowered the repo – the rate at which it lends to commercial banks – to a record low of 4.75 per cent, from a peak of 9.0 per cent seen last year.

It also announced a cut in the reverse repo – the rate at which it borrows from banks – to 3.25 per cent.

"The major challenge at this stage is to support drivers for demand, to enable the economy to return to a high growth path," RBI governor D. Subbarao said in the annual policy statement for the year to March 2010.

Hong Kong's composite interest rate fell to 0.29 percent at the end of March from 0.33 percent at the end of February, the Monetary Authority of Hong Kong said on Tuesday.


China to launch more stimulus investment in Q2 --
China Securities Journal (CSJ)

The Chinese central government is expected to launch its third batch of stimulus investments in large domestic projects in the second quarter to further boost its economy, according to the China Securities Journal Tuesday, citing an unidentified source.

The central government has so far cashed in a combined 230 billion yuan (33.8 billion U.S. dollars) for its 4-trillion-yuan stimulus package announced last November to bolster the slowing economy, 100 billion yuan in the fourth quarter and 130 billion yuan in the first quarter.

The newspaper said the new money would continue to be poured in projects that could benefit people's livelihood, such as health and education sectors, big infrastructure projects, and housing for low-income earners. Previous investments were dedicated to similar purposes.

An official of the National Development and Reform Commission (NDRC) confirmed the new investment, but said the exact amount was not decided yet. He spoke to Xinhua Tuesday morning on condition of anonymity.

South-South Cooperation News Wire

Peru, Brazil to hold Border Summit on April 28 -- Andina

Lima, Apr. 21 (ANDINA).- Peruvian President Alan Garcia Perez and Brazil’s Luiz Inacio Lula da Silva will hold a bilateral meeting called “Border Summit” on April 28 in the Brazilian city of Rio Branco.

The Border Summit will include a meeting with governors of nine Peruvian southern regions around the Inter-Oceanic Highway (Ayacucho, Arequipa, Apurimac, Ica, Cusco, Madre de Dios, Moquegua, Puno and Tacna), and governors of the Brazilian states of Acre, Rondonia, Matto Graso and Amazonas.


Chinese, Egyptian FMs hold talks on boosting co-op -- Xinhua

CAIRO, April 21 (Xinhua) -- Visiting Chinese Foreign Minister Yang Jiechi and his Egyptian counterpart Ahmed Abul Gheit held talks Tuesday, during which they agreed to strengthen cooperation between the two countries.

Yang said Egypt is an important partner of China among developing countries, and the bilateral relations have stepped into a new phase after establishing ties of strategic cooperation 10 years ago. China cherishes its relations with Egypt and is willing to expand the cooperation in various areas.

Tuesday, April 21, 2009

Looking for a job? You should check out a job fair in China

Having been a member of the foreign expat work force in China I found it quite interesting with this Reuters video about the increasing number of foreigners looking for work in China

According to this Reuters report about 1300 foreigners from over 40 countries, including places like the US and UK, showed up at this recent job fair in Beijing

China shines at Shanghai auto show - Reuters Video

Apr 21 (Reuters) - Global automakers look to China's growing market as they gather at this year's Shanghai Auto Show, but the lone bright spot is also producing potential rivals to the industry's main players.

Monday, April 20, 2009

Rice Futures

China initiated trading of Rice futures today on the Zhengzhou Commodity Exchange.

Rice futures rose after markets opened in China on expectations government policies to boost planting interest and food security may bolster prices, according to Bloomberg.

Yang Jing, an analyst at Dahua Futures Co. told Bloomberg in this article“It is the first day of trading, so some investors may decide to give the new product a shot, I see the contracts mainly being used by processors for hedging.”

Either way. Rice Futures = Very Cool

Although it will probably be some time until China's Rice Futures are like the agricultural futures which trade over in Chicago, which more closely reflect the true price of the commodity in the world market, it is no less a step in the right direction for China's ever going process of modernizing and evolving their financial system.

---> Zhengzhou Commodity Exchange (ZCE)

The first experimental futures market approved by the State Council, was established on October 12, 1990. It introduced futures trading on May 28, 1993, two years after the successful operation of cash forward contract trading. In August 1998, the ZCE was confirmed by the State Council as one of the three futures exchanges in China.

Obama a hit at the Summit of the Americas - Reuters Video

Overall, this Reuters video does a decent job of summing up the Summit of the Americas in 2 minutes time. It doesn't go into too much detail, but does highlight how the leaders of the Americas received the new president of the United States.

Other countries news sites had slightly different areas of focus than the coverage in the NYT, WSJ or other major online US news.

Apr. 19 (Reuters)- Latin American leaders are hailing as a success an Americas summit that consecrated President Barack Obama as a positive partner in the hemisphere.