Tokyo Stock Exchange list’s Brazilian ETF’s

ETFs are funds listed and traded on stock exchanges, which are commonly referred to as "listed investment trusts" in Japanese. Like stocks, investors can trade ETFs on stock exchanges through securities companies.

ETFs aim for "asset management linked to specified stock price indexes, etc.," and as such, have the quality of very closely tracking the market prices of the underlying stock price index, etc.

"NEXT 　FUNDS　Ibovespa Linked Exchange Traded Fund" ETF managed by Nomura Asset Management Co., Ltd. and the "Daiwa ETF・TOPIX-17" , a group of 17 ETFs managed by Daiwa Asset Management Co. Ltd., are slated to list on the Tokyo Stock Exchange on July 17, 2008, and July 23, 2008, respectively.

List of TSE-listed ETFs

ETF management company websites:

NEXT　FUNDS　Ibovespa Linked Exchange Traded Fund  Nomura Asset Management Co.,Ltd.
Daiwa ETF TOPIX-17  Daiwa Asset Management Co.Ltd.

In its medium term management plan, the TSE set a goal of 100 ETFs listed on the TSE within the next three years. We will continue to make efforts to diversify our ETF lineup in order to live up to the expectations of investors.

Source: TSE June 26,2008

Brazil imposes 2% tax on foreign capital inflow for Equities and Fixed Income

SAO PAULO (Dow Jones)–Brazil will impose a 2% tax on foreign capital inflows toward equities and fixed-income investments in an effort to slow the ongoing appreciation of the country’s currency, the real, Brazilian Finance Minister Guido Mantega said Monday.

Mantega said the government plans to levy the country’s IOF Financial Operations Tax on incoming foreign investment beginning Tuesday.

The Minister said the tax was not aimed at raising government tax revenues, but curbing excess capital inflows that have pushed up the value of the real and hurt the country’s foreign trade balance.

Brazil’s currency has appreciated more than 35% against the dollar so far this year under the impact of a faster-than-hoped for local economic recovery and increasing investor appetite for Brazilian assets.

Source: DowJones News Wire, 19.10.2009

News Summary:

SAO PAULO, Oct 19 (Reuters) – Brazil unveiled plans on Monday to tax capital inflows heading to fixed-income investments and stocks in a bid to prevent the country’s hard-charging currency from strengthening further. Finance Minister Guido Mantega said the government will charge a 2 percent financial transactions tax on foreign investment flows to Brazil’s stock market and local fixed-income securities such as government bonds. ^[1] The tax, which will take effect on Tuesday, will be charged only once, when the capital enters the country, Mantega said. He stressed that foreign direct investment would continue to flow freely into Brazil, untaxed. “Our concern is with excessive speculative investments, short-term capital that could cause a bubble,” Mantega told reporters in Sao Paulo, where he outlined the measure after meeting with President Luiz Inacio Lula da Silva, who had initially opposed the tax. “Nothing changes with respect to foreign direct investment,” he added.^[1]

SAO PAULO (Dow Jones)–The Brazilian real closed slightly weaker against the U.S. dollar Monday on market worries about possible tax changes that might diminish foreign investment inflows.^[2] Unlike in the past, however, foreign capital flocking to Brazilian stocks will also be taxed. The measure aims to put the brakes on Brazil’s currency, the real, which has gained a whopping 36 percent against the U.S. dollar so far this year as foreign investors have shifted money to high-yielding emerging markets. Brazil’s stock market has also been a magnet for foreign investment this year, helping lift the benchmark Bovespa index 79 percent since the start of the year.^[1] The rate of the levy — 2 percent — was larger than expected, which could have a negative impact on the market in the near term, RBC Capital Markets said in a research note. It is unclear if the measure will ultimately staunch the flood of foreign money into Brazil, whose robust economy and red-hot capital markets have made it a favorite with investors around the globe. Economists note that the real’s surge this year is partly the result of a weaker U.S. dollar globally, a trend that is beyond the control of Brazilian policymakers.^[1]

Direct investment in the productive economy will not be affected. The move, announced shortly before local markets closed on Monday evening, is designed to slow the appreciation of Brazil”’s currency, the real, which has gained 36 per cent against the U.S. dollar this year.^[3]

Brazil’s real, among the world’s fastest-climbing currencies, dipped against the dollar Monday on investor expectation that the levy would be imposed. The real has gained about 35% against the dollar this year.^[4]

Analysts expect solid demand for the local notes, given recent optimism surrounding Latin America’s largest economy. Brazil emerged from recession in the second quarter of this year, with 1.9 percent growth, making it one of the first countries to come out of the global financial crisis.^[5] Currently, only non-financial companies in Brazil are allowed to issue the notes, known locally as debentures. “We are likely to authorize the issuance of local notes already this week,” the source told Reuters. The government expects this will help increase the availability of credit, reduce banking spreads and reduce the need for banks to tap markets abroad, the source added.^[5] BRASILIA, Oct 19 (Reuters) – Brazil’s government is likely to authorize banks to issue real-denominated domestic debt to raise capital as early as this week, a source at the Finance Ministry told Reuters on Monday.^[5]

Mantega said the central bank would keep buying dollars on the spot market to bolster international reserves, which have surged to an all-time high of $232.3 billion. Some economists said the government could have adopted other measures to halt the real’s appreciation, such as cutting public spending and lowering import tariffs on capital goods, which would increase demand for U.S. dollars.^[1] Brazilian Finance Minister Guido Mantega said Monday the government plans to levy an “IOF” Financial Operations Tax on incoming foreign investment beginning Tuesday.^[6] SAO PAULO (Dow Jones)–Brazil will impose a 2% tax on foreign capital inflows toward equities and fixed-income investments in an effort to slow the ongoing appreciation of.^[7] SAO PAULO (Dow Jones)–Brazil is imposing a new tax on foreign portfolio inflows into fixed-income and surging equities markets in a bid to cool the red-hot appreciation of the country’s currency, the real.^[6]

“With our currency overvalued, we’re going to export less and we’re going to be less competitive,” Mantega said, noting that 25 percent of Brazil’s industrial output is shipped to foreign markets. ^[1]

Asked about the measure in Sao Paulo, Finance Minister Guido Mantega confirmed the government was studying the move and said it would be announced “once it is mature.”^[5]

To view or change all of your email settings, visit the Email Setup Center ]] Email Setup Center. ^[7] The levy resurrects a financial transactions tax on fixed-income investments the government scrapped last October, when the global credit crisis took a turn for the worse and investment flows dried up.^[1] “We’ll continue to encourage foreign investment. Foreign investors are welcome, and they’ll continue to come.”^[1] The move aims to curb “excess capital inflows” that have pushed up the value of the real, hurt the country’s foreign trade balance and threatened local jobs.^[6] The measure would increase the options banks have to raise funds in domestic markets and in local currency, avoiding the risk of a fluctuating exchange rate, the source said on condition of anonymity because the measure has yet to be unveiled.^[5]

SOURCES

1. UPDATE 3-Brazil taxes capital inflows to brake real’s surge
2. Brazil Real Closes Weaker On Possible Tax Changes – WSJ.com
3. FT.com / Americas – Brazil imposes 2% on capital inflows
4. Brazil’s Foreign Levy Aims to Cool Hot Real – WSJ.com
5. UPDATE 3-Brazil to allow banks to sell local notes – source | Reuters
6. UPDATE:Brazil Slaps Tax On Fund Inflows To Check Real’s Gains – WSJ.com
7. Brazil’s Mantega: Govt To Levy 2% Tax On Foreign Investment – WSJ.com
8. IMF Official: Inflow Taxes Like Brazil’s Tend To Be Porous – WSJ.com

Asia’s affluent lose one-fifth of wealth in 2008 – CapGemini-Merryll Lynch Asia Wealth Report 20

Hong Kong’s high-net-worth crowd were the hardest hit by the financial crisis, according to the annual wealth report from Capgemini and Merrill Lynch.

It was perhaps inevitable that after experiencing such rapid wealth growth in the past few years, Asia’s high-net-worth individuals suffered particularly keenly from the recent crisis. But there is still huge market potential in the region for those wealth advisory firms able to tap it. Download: Asia-Pacific_Wealth_Report_2009_CapG_ML

The wealth of the region’s high-net-worth individuals (HNWIs) — those with $1 million or more in investable assets — fell by 22.3% to $7.4 trillion last year, below the level in 2006. That compares to a fall of 19.5% for global HNWI wealth, according to the 2009 Asia-Pacific Wealth Report, released yesterday by consulting firm Capgemini and Merrill Lynch.

Hong Kong HNWIs saw by far the biggest drop, losing 65.4% of their wealth, followed by those in Australia (29.7%), Singapore (29.4%) and India (29.0%). South Koreans got off lightest with a 13.4% decline in asset value, while Japan saw a fall of 16.7%.

In terms of market capitalisation, the Asia-Pacific region as a whole saw an average fall of 48.6% last year, with China (60.3%) and India (64.1%) suffering the biggest declines of the countries surveyed*.

With regard to asset allocation, the report noted three key trends. First, Asian HNWIs undertook a ‘flight to safety’ to cash-like assets with their allocation to cash-based investments rising to 29% in 2008 from 25% the year before. This reflected an increase in the global allocation to cash in 2008 to 21% from 17% in 2007. Taiwan had the highest allocation to cash/deposits at 41% of its total portfolio, while India had by far the least with 13%.

Another trend was an opportunistic shift back to real estate investment with an allocation of 22% in 2008, up from 20% the year before. Regionally, Australia had the highest allocation to real estate (41%), closely followed by South Korea (38%), while Taiwan had the least (15%).

As for other asset classes, India had the largest allocation to equities (32%), despite the heavy fall in the country’s stock market last year, while South Korea had the smallest (13%). And, perhaps surprisingly, Indonesia had the largest allocation to alternative investments (9%), covering structured products, hedge funds, derivatives, foreign currency, commodities, private equity and venture capital.

The third broad trend noted by the report was a retreat to home-region and domestic investments with HNWIs increasing their domestic investments to 67% in 2008 from 53% the year before. China was the top Asian market for investment by HNWIs in Asia-Pacific ex-Japan, while their peers in Japan preferred to invest domestically.

Allocations to mature markets are likely to increase through 2010 as Asia-Pacific HNWIs seek more stable returns. Allocations to North America, for example, are predicted to rise from 17% last year to 20% in 2010.

In terms of diversity of geographic distribution of investments, Japanese HNWIs were the most diversified beyond Asia in 2008 with 45% of their allocation outside the Asia-Pacific region. The least diversified were the Chinese with a 17% allocation outside Asia-Pacific, and India with a mere 14% invested outside the region.

On a wider level, the crisis resulted in many Asian clients shifting their assets towards regional and local firms, changing the competitive landscape. Such moves exposed “weaknesses in the capabilities of the region’s wealth management firms and especially revealed the disparate strengths and weaknesses of international firms versus regional and local competitors”, says the report.

In terms of the challenges faced by wealth management firms in Asia, they feel maintaining client trust/client retention is by far the biggest concern, according to a Capgemini survey carried out during July and August. Eighty-five percent of wealth management advisers cited this as the biggest challenge they face as a result of the crisis, and 45% cited as the next major issue the need to have the right skill set and talent to cater to HNWI clients.

A closer look at the issue of client attrition shows that 42% of wealth advisers lost clients last year; 63% of those advisers employed an individual-adviser model, while 37% used a team-based model. Meanwhile, younger advisers tended to lose more clients than older ones with 62% of those who lost clients being 40 or under. “Advisers were not mature enough to handle the intense market conditions,” says the report.

Experience is clearly key, and advisers in the Asia-Pacific region were less well able to handle the economic turmoil. The average amount of experience for the region was 9.7 years, versus the global average of 13.3 years. Wealth management firms need to remedy this situation if they are to make the most of the untapped market potential in China, India and elsewhere in the region.

* The report focuses on 11 markets: Australia, China, Hong Kong, India, Indonesia, Japan, New Zealand, Singapore, South Korea, Taiwan and Thailand. Together, these account for 95.3% of Asia-Pacific gross domestic product.

Source: Asian Investor, 14.10.2009

SAFE sets new rules for QFII and QDII portfolio investors in China

BEIJING, Oct 11 (Reuters) – China has formally relaxed rules on inbound portfolio investment, raising the maximum sum a single institution may invest to $1 billion from $800 million, the State Administration of Foreign Exchange (SAFE) said.

The new rules governing China’s Qualified Foreign Institutional Investor (QFII) programme also shorten the lock-up period for insurers and pension funds to three months from the one-year requirement that other investors must follow.

The changes, which came into effect on Sept. 29, are broadly in line with draft proposals released in early September.

According to a statement on SAFE’s website, the currency regulator had granted investment quotas totalling $15.72 billion to 78 investors by the end of September. UBS was the only investor to have used its full $800 million quota.

Separately, SAFE said actual capital inflows under the QFII programme had reached $14.50 billion at the end of August compared with a cumulative approved quota at the time of $15.32 billion.

Source: Reuters, 11.10.2009

SHANGHAI (Dow Jones)–China is raising the maximum limit a single qualified foreign institutional investor, or QFII, can invest in the domestic stock market to US$1 billion from US$800 million, the country’s foreign exchange regulator said over the weekend in rules that take effect immediately.

The relaxation of the rules under the program that allows designated foreign investors to trade yuan-denominated A-shares had been expected, but its timing comes as China’s stock markets are set to reopen for a full week of trading on Monday after being shut since Oct. 1 for a holiday break.

The State Administration of Foreign Exchange (SAFE) said that it may adjust the QFII quota ceiling as needed in the future and that reviews under the QFII program, first launched in 2003, will be more balanced going forward.

However, the revised rules also continue to underscore the strong oversight Beijing is keeping on cross-border capital flows, highlighting China’s very cautious approach toward opening up its domestic stock markets and liberalizing the capital account of the world’s third largest economy.

In statements posted on its Web site late Saturday, SAFE said that the lock-up period of funds for some institutional investors under the QFII program will be shortened to three months, though for other funds the one-year lock-up time remains enforce.

The shorter lock-up period that applies to pension funds, insurance funds, charity funds and government funds, among others, is aimed to encourage medium- and long-term investing, SAFE said.

The revised rules, which were first circulated as a draft proposal for public comment in early September, took effect Sept. 29, according to the SAFE statements. The maximum quota for a single QFII is being raised to US$1 billion, from US$800 million and the minimum quota application each time must be at least US$50 million, the revised rules state.

“SAFE can adjust the ceiling based on economic and financial trends, the supply and demand in the forex market, and the balance of payment situation,” the rules state.

China has given preference to review and approval of pension funds, insurance funds, mutual funds, charity funds and government funds under the QFII program, SAFE said.

China’s QFII program allows qualified foreign institutional investors to invest in securities traded on the country’s domestic stock markets, namely A-shares in Shanghai and Shenzhen, which this year have been one of the world’s outperforming stock markets.

As of the end of September, a total of 78 foreign institutions obtained the QFII quota totaling $15.72 billion, SAFE data showed.

The approval for QFII status comes from China’s securities regulator, but it is SAFE that has authority over granting quotas. This year SAFE has granted 12 QFIIs quotas with the most recent being Bank Negara Malaysia, the Malaysian central bank, and Deutsche Bank Group’s DWS Investments. Both were each approved US$200 million in QFII quotas in September, SAFE data showed.

Once approval for a quota is given, the QFII has to wait a year before applying for a new quota; and the QFII has to remit the approved funds within six months from getting approval, the rules state.

The revised rules on QFII programs also allow a single QFII to open different types of investment accounts and allows more convenience in foreign exchange, redemption and other area. The administration said it may reduce a QFII’s investment quota if it fails to effectively use the quota within two years of approval. SAFE also strictly forbids QFII to transfer or sell investment quotas to others.

In a move to increase transparency in the QFII program and the Qualified Domestic Institutional Investors program, which allows domestic investors to invest in overseas securities, SAFE said it will regularly disclose the status of its approval process. As of the end of September, SAFE also approved 56 QDIIs so far with a total of $55.95 billion investment quota, SAFE data showed.

Source: DownJones, 11.10.2009

Brazil: Trader Futures on BM&BOVESPA Webinar October 7th, 2009

Join BM&FBOVESPA, Patsystems and Flow Corretora on October 7th for an exciting webinar on the latest developments in the Brazilian market.

In light of the U.S. Commodity Futures Trading Commission "No Action Letter" allowing U.S. participants to trade BM&FBOVESPA Ibovespa futures contracts, the Brazilian market presents more opportunities than ever. Learn about these opportunities and more in a webinar presented by Patsystems and BM&FBOVESPA, along with Flow Corretora, one of the largest BM&FBOVESPA brokerage firms.

Space is limited, Register your seat here

Event Details:

BM&FBOVESPA products, including Ibovespa
Regulatory requirements for foreign participants
Connectivity options for accessing the BM&FBOVESPA exchange
Trading Ibovespa futures on Patsystems Pro-Mark
Business opportunities in Brazil in partnership with Flow Corretora
Date: Wednesday, October 7, 2009
Time: 9:00am CDT/11:00am SP/15:00 GMT

Source: Pathsystems, 30.09.2009

BMV - Mexican Stock Exchange -will adjust its Index to free float market capitalization on November 3rd, 2009

The significance of market indices has increased over time as they have been used as reference for the design of financial securities, mostly ETFs. Thus, for a market index to serve as a market reference today, it needs to meet the following two criteria (for details see methodology, constituents and changes on 03.11.2009) :

1. Be representative
Constituents should reflect the behaviour of he market where they are listed.

2. Be investable
The liquidity and depth of the constituents should be such that they respond to the liquidity requirements of the market participants In order to ensure that the BMV’s index keeps these characteristics, the Exchange through its Index Methodology Committee, conducted an in-depth analysis of the characteristics of the Mexican market, of its listed securities and the international trends and best practices in terms of index methodologies.

It is worth mentioning that the new rules are consistent with the goals of the market and its participants; by promoting liquidity they increase the Index’s invest-ability and trading in its securities.

As a result of the above-mentioned analysis and with its commitment to the Mexican market, BMV has determined:

a) The sample size of its index remains unchanged.
b) For eligibility and rebalancing criteria only for the IPC:

• The next annual rebalancing of the index will be carried out in February 2010, under the current rules.
• In September 2010 the index will be rebalanced according to a new Liquidity Factor (instead of the Marketability Index currently used). This new factor will better reflect the trading activity and liquidity conditions of the constituent.
• The Stock Exchange will announce new eligibility rules in January 2010.
• As of 2011 the rebalancing of the index will be done every year in September.
  

c) Regarding weighting methodology.

BMV will adjust its index for free float (FF) since it reflects the actual available shares. Shares held by control groups, founding families, or strategic investors such as governments will be deemed as non-available shares.

Source; BMV 30.09.2009

Mexico: Waiting for Congress – October 2009 IXE-Banif Market Analysis

The world seems to be doing better, and with it the USA economy. The FED continues to maintain rates at very low levels, between 0 and 0.25%, and will likely not change this policy until mid 2010, and then only if inflation starts getting out of hand especially once governments finally take the step to start reducing liquidity.

Download: Mexico - Monthly allocation - October 2009
However, Mexico lags the rest of the world while it continues to await the discussion of Congress on the economic package. Congress has until November 15 to vote on the project. The vote is not an easy one as President Calderon asks for tax increases at a time when Mexico, more than other countries, suffers from the financial crisis. Thus, our expectation is that they will use all the time that they legally have to vote.

This means that we will probably see Mexico showing growth once more only in 2010, and only if the USA economic activity continues to develop positively, resulting in increased imports from the country. The increase in taxes brings with it another concern, inflation. One of the suggested measures is a 2% tax increase on food, which retailers will pass through to consumers. Thus, although there would be some room for interest rate decreases, the Bank of Mexico should maintain them unaltered until 1Q10, when they could actually increase them once more to prevent inflation.

Flow of funds and 3Q earnings will drive the market
One of the main indicators to watch in October is the amount of foreign resources flowing into Mexico. The fixed income has rallied of late with the amount of foreign resources going into the bond market. Part of these funds may change direction and, as in other parts of the world, start looking for opportunities in the Mexican stock market.
October is also a month when Mexican companies post their 3Q earnings. This will likely be one of the main drivers of the market this month. However, concerns on the effects of the fiscal package on some sectors may offset positive numbers for the quarter. We continue to bet on the homebuilding sector, as we believe demand continues strong and it continues to be a strategic sector for the government due to its social benefits and as it is a job creator in times of crisis.

Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – positive 3Q09 on MOU increase indicating higher revenues
ASURB– undervalued against sector, good value play
BIMBOA – will show EBITDA up by 60% and higher margins
FEMSAUBD – higher sales lead to positive 3Q09 earnings
GEOB – trading at attractive valuations
GMEXICOB – key month on legal process in the USA leads to a reduction in discount
GRUMAB – 3Q09 as strong as 1Q09 signifies a 70% growth
ICA – should post an excellent 3Q09 result
MEXCHEM – successful conclusion of bond issue allows for pre payment of debt
URBI – trading at attractive valuations
WALMEXV – expected 13% increase in EBITDA and 12% in sales

Source:Banif - IXE, 01.10.2009

More Tweaking and Consolidations for China's Brokerage Firms

A fourth round of securities industry reform is forcing some of the nation's 107 brokers to merge while locking out foreign investors.

A red banner draped above a Nanjing building doorway at 90 Shandong Road enthusiastically declared, "Battle for Entry into Industry First Tier."

The banner was celebrating regulatory approval in August for a joint venture – 18 months in the making -- between Huatai Alliance Securities and the former Shenzhen Alliance Securities.

The message also mirrored an upbeat mood for selected players in the nation's brokerage business. They plan to benefit from a new wave of consolidation that's sweeping the industry following recent government enactment of two policies: the Intra-Industry Competition Ban, and the One Participant, One Controller rule.

Soon, industry analysts predict, dozens of the 107 securities firms now operating in China could disappear in one fell swoop, altering the industry landscape in the fourth consolidation wave since securities trading began in China.

Local governments that control minor brokers may be negatively affected by the changes, which are aimed at strengthening the industry overall. But domestic players that survive the shakeup are likely to remain shielded from foreign competition for some time.

Individual firms are mapping out survival strategies.

Second-tier firms such as Huatai, Guoxin Securities and GF Securities are now being encouraged by regulators to seize the opportunity, strengthen integration efforts and expand their territories.

The China Securities Regulatory Commission (CSRC) gave a green light to Huatai's proposal to reach beyond its traditional, local business in Jiangsu and Zhejiang provinces and battle for a position as a top-tier brokerage.

Some firms may lose out over the policy changes. Large brokerages controlled by CITIC Securities and the so-called Huijin Family, for example, are being limited in this latest round of restructuring by the One Participant, One Controller rule.

But the ultimate goal, as the office building banner in Nanjing suggested, is a rapid ascent for every firm that emerges from the consolidation push.

Step by Step

The integration wave reflects the kinds of industry pressure and regulatory urging that were seen before. Brokerage firm crises gave birth to the first round of consolidation, spurred by the government, in the 1990s. That led to mergers between firms, such as Shenyin and Wanguo combining to become Shenyin Wanguo. Similarly, Guotai and Junan merged.

After 2000, as capital poured in and share trading expanded, nationwide powerhouses such as CITIC Securities appeared on the scene. That development was followed by a three-year, comprehensive overhaul of the brokerage industry starting in 2004, which triggered consolidation battles affecting 48 firms that had been on the brink.

A wave of mergers and acquisitions among small- and medium-sized brokerage houses altered the industry last year, setting the stage for the latest round of reform. Annual reports for 2008 show the top 30 firms currently control 91 percent of the domestic market, while the 10 largest firms have a 64 percent share.

By the time the dust settles from the latest consolidation, market insiders say, only around 70 or 80 firms will remain.

Regulatory Persuasion

Experts say regulators promoted the latest integration by enacting the new rules despite resistance from the opponents of consolidation, including local governments.

"This integration tide is both a requirement from regulators and a result of the need to expand to survive," a Shanghai brokerage executive explained. "One could say that the involvement of regulators has sped up the pace of integration.

"For securities firms that have been around for nearly 20 years and have experienced several restructurings, mergers and acquisitions, internal governance practices have reached a critical point where integration is necessary."

Central government regulators hope to chip away at a system that has protected brokers with tight links to local government fund-raising.

The brokerage executive said local governments hold controlling stakes in most small and medium-sized domestic brokerages, and none want to lose these financial platforms. Governments want to use these brokerages to push forward reforms of state-owned enterprises and encourage companies to go public.

No wonder local governments have resisted broker restructuring, adding obstacles to possible mergers and acquisitions that would cross geopolitical boundaries.

The two new regulations "mean that the pace of integration in the brokerage industry is likely to accelerate, despite problems such as distribution of benefits (and) regional protectionism," said Wang Dali, an analyst at Southwest Securities.

"A brokerage with annual profits of 200 to 300 million yuan is a very good business in the eyes of local governments," the brokerage executive said. "But in the brokerage industry, it makes for an awful company and an obvious target for M&A."

Integration Moves

The latest consolidation wave may not be the last for China's brokerage industry. Experts say reform's climax would require a break-up of the Huijin Family and allowing foreign brokers into the market – developments that may be far in the future.

Nevertheless, the One Participant, One Controller rule presents a substantial barrier to the Huijin Family. The policy says two or more securities firms controlled by a single company or individual, or firms with controlling interests in each other, cannot conduct overlapping brokerage business.

During the 2004 overhaul, Central Huijin Co. -- then controlled by the central bank -- and its wholly owned subsidiary China Construction Bank Investments Co. (CCB Investments) were entrusted with disposing risk in the brokerage industry. That led to Huijin and CCB Investments taking partial or controlling interests in nine brokerage firms, giving them the nation's largest market share and enormous power in the industry, building what insiders called the Huijin Family.

Huijin has been gradually taking over some CCB Investments brokers since last year, allowing CCB Investments to reach the One Participant, One Controller standard. But Huijin itself owns stakes in seven brokerage firms -- far exceeding the limit.

Huijin is trying to accelerate the transfer of its broker shares to UBS Securities, Guotai Junan and Qilu Securities, yet it is still majority shareholder in Galaxy Securities, Central Investment Securities, Shenyin Wanguo and CITIC Construction Investment Securities.

If One Participant, One Controller were strictly enforced, these large brokers would not only be restricted from going public, but internal integration could be impeded as well.

"In the current market environment, in what form, at what price and how to exit are sensitive and difficult-to-answer questions for Huijin, regulators and Huijin's brokerages," a Huijin executive said.

There were once rumors that CSRC was inclined to let Anxin Securities take over Huijin's brokerage stake. But price was apparently a sticking point. Anxin is owned by the China Securities Investor Protection Fund, which is managed by CSRC.

"What needs to be clear is that Huijin at the time (of the last consolidation) saved the securities industry by taking over those (troubled) brokerages," a source close to Huijin said. "Now, those assets have seen huge increases in value. Should Huijin not keep those profits? "Price is the key issue," the source said.

One brokerage on track for growth through a merger is Guoxin, which ranked third in equity funds transactions and first in investment banking share issuances last year. Last year, Guoxin posted net profits of 2 billion yuan and 45.2 billion yuan in assets, ranking it seventh in the industry.

Although the company has only 49 offices, it boasts registered capital of 7 billion yuan and was one of only two firms to win AA ratings for two consecutive years.

In August, a Guoxin official said the company would acquire Hualin Securities. Previous market rumors pointed to a possible tie-up between Guoxin and Dongguan Securities.

Cool to Foreigners

Meanwhile, the current climate of consolidation parallels chilly attitudes toward foreign investment. Regulators are clearly cautious about issuing brokerage and advisory licenses to foreign enterprises.

China allows foreign financial companies to offer only investment banking. The only exception is China Euro Securities, a joint broker with foreign backing, which has a brokerage business permit to operate in the Yangtze River Delta region and an investment advisory business permit from CSRC.

"CSRC's goal is to allow domestic brokerages to grow and develop sufficiently before allowing foreign investment," one brokerage executive explained. "One Participant, One Controller directly encourages securities companies to develop as a community, supporting the superior and eliminating the inferior, and pushing medium-sized brokerages to grow bigger and stronger."

In early August, sources close to the U.S. financial giant Goldman Sachs said the company expected to receive a license for securities industry asset management. But CSRC information has continued pointing toward difficulties for foreign securities firms in receiving anything but investment banking licenses in the near-term.

Under a State Council directive to speed up Shanghai's development as a financial center, the city's joint venture securities and fund companies have been told to take the lead in opening the door wider. It was suggested this could expand the scale of brokerage licenses issued to foreign institutions. Asset management and self-service businesses were expected to gradually open to foreign investment as well.

But the domestic industry may not be ready for foreign players. A CSRC spokesperson said, "If we throw open the door, two-thirds of China's 107 brokerages would be out of business. The current financial crisis further proves that a policy of steadily opening up is correct."

Source: Caijing.com, 04.09.2009 by Fan Junli

Brazil: Softly, softly, the best approach – October 2009 IXE-Banif Market Analysis

The continued rally of the markets is both surprising and alarming. It assumes a recovery of the economy that the indicators do not confirm. Consequently, there is a fear of profit taking, and that this will be stronger than originally estimated. The uncertainty of when it will take place, if in October or only next year, is the dilemma facing investors.

Download: Brazil - Monthly allocation - October 2009
Market liquidity continues to be excessive. We believe that it is this large volume of resources and not the feeling that the worst is over, which is boosting markets. While the flow of resources into the real economy does not stop, a stronger profit taking becomes improbable. In Brazil, the government has started taking steps to reduce the flow. It has modified the bases for reserve requirements slightly and is gradually increasing the IPI to reduce the benefit from buying vehicles and white line goods.

In Brazil, from here onwards, the elections start to gain an increasing importance. October starts with the President of the Central Bank siding with the largest national party, PMDB. All he does not say is if he will be a candidate, leaving the Central Bank in March, or if he leaves, as will President Lula, only at the end of his mandate that goes to December 31, 2010.
We must not forget the pre-salt regulations currently under discussion at Congress. The tendency is for this to benefit the national market, which may or may not result in Brazil gaining more resources.

The dreamed for investment grade
The last classification agency approval needed to increase Brazil’s investment grade has finally done so: Moody’s has also classified Brazil at first-degree investment grade. This should bring resources to the Stock Market from foreign investors that can only invest in countries that have the seal given by the three main agencies. However, this should not happen in the short term, seeing as these new potential investors must study opportunities and compare them to others in the world.

Shares from the domestic economy should outperform
The certainty that at some point the Brazilian market should cash in the substantial profits gained this year causes us to suggest a continued conservative stance for our October portfolio. After all, the Ibovespa has gained 64% this year. We continue to prefer names linked to the development of the internal economy and good dividend payers. However, we have also kept our bets on the mining and steel industry due to potential gains, mainly from better sales volumes.

Outperforming the Ibovespa
Share – Catalyst/Fundamental
BRTP4 – highest upside potential in the sector
CPLE6 – Defensive in a month where we expect an increase in volatility
ITUB4 – 3Q09 result should show synergy gains
JBSS3 –demand/price recovery in the, private placement e M&A
LAME4 – Sales on ‘Children’s Day’ and during the Christmas period
LIGT3 – Discounted in relation to its peers
MMXM3 – Expectation Wuhun Iron Steel will confirm its offer
MRFG3 – demand/price recovery; M&A and distribution agreements
PCAR5 – Good representative of the internal market, operating in retail and food
TLPP4 – Announcement in October o a high dividend yield for the year 2009
USIM5 – 3Q09 result should report margin expansion
VALE5 – Increased sales of ore and pellets to the European market

Source: Banif-IXE, 01.10.2009

China chooses Mexico as its main foreign investment destination

Mexico is now the place with the highest number of investment projects of Chinese companies outside China. Currently, about 109 development plans are carried out throughout the Mexican territory.

The most attractive sectors for Asian firms are manufacturing -- assembly plants, mining, agriculture and even the assembly of cars, drilling and oil exploration.

According to studies of international consultants, Mexico currently offers to the United States better manufacturing costs than China, Chinas manufacturing costs have increased in the past 3 years and are just 6% below manufacturing costs of some U.S. locations, while the Aztec country remains 25% lower compared to its northern neighbor.

Approximately 57 Chinese companies have set up in Mexico since they consider it as the ideal place for cheaper production, due to the low cost of Mexican manpower; the avoidance of elevated tax duty on Chinese products since Mexico is part of NAFTA plus the close proximity and having the world"s largest consumer market: the United States, as a business partner.

This has allowed Mexico to be in the sights of more Chinese enterprises. The company Hon Hai, the largest electronics manufacturing contractor in the world, decided to establish a manufacturing plant in Ciudad Juarez, Chihuahua, in northern Mexico, which will employ 20,000 people.

In Sonora, the Chinese textile company Sinatex invested $92 million dollars in the installation of a maquiladora plant, from which it will supply about 25% of total imports of threads to the U.S.

The mining sector in Mexico has also drawn the attention of Asian investors; the company Jinchuan Group Ltd. spent $25 million dollars on exploration of the Bahuerachi mining project, in the state of Chihuahua, to produce zinc, copper, molybdenum and silver.

The companies Sinopec and PetroChina are currently engaged in drilling and exploration in the Gulf of Mexico for its counterpart, Petroleos Mexicanos.

Xintian-Mexico integrated company in agriculture and trade in certain scale, bought in 1998 1,050 hectares of farmland in Campeche to start with agricultural development that has allowed to have a fixed asset of more than $10 million dollars.

Among the future Chinese investment in Mexico, are the Foton Mexico, auto Assembly Company, which plans to invest over $250 million dollars and generate about 1,000 direct jobs and 3,500 indirect jobs in the state of Michoacan, and Lenovo, technology manufacturer, that will invest $40 million dollars to produce laptops in Mexico, this is its largest investment of the company outside of China.

Source: E-mid, 28.09.2009

Hong Kong: HKEx Free Prices Website Service in HK and China

Hong Kong Exchanges and Clearing Limited (HKEx) announced today (Friday) that its information business subsidiary, HKEx Information Services Limited, has signed an agreement with each of the companies listed below (the service providers) for provision of real-time basic prices from HKEx's securities market at the six designated websites.

Service Providers (in alphabetical order by region)

Company Name	Designated Website
Hong Kong
AAStocks.com Limited	www.aastocks.com
ETNet Limited	www.etnet.com.hk
Oriental Press Group Limited	www.on.cc
Mainland
Beijing Sohu New Media Information Technology Co., Limited	www.sohu.com
China Finance Online Co. Limited	www.jrj.com.cn
Tencent Holdings Limited	www.qq.com

The Free Real-time Basic Market Prices Website Service (or Free Prices Website Service) will be soft-launched next Monday, 5 October in both Hong Kong and the Mainland. The trial version of the new website service will be available at the designated websites for investors to access real-time basic prices from HKEx's securities market free of charge from the soft-launch date. The service will be officially launched on 1 January 2010 under a pilot programme that will last till the end of December 2011. HKEx plans to review the pilot programme in its latter stage to determine whether and, if so, in what form the service should be continued after 2011.

The main objectives of the new website service are to expand dissemination of Hong Kong securities market information and raise the Hong Kong securities market's profile in the Mainland. HKEx believes that the free service will benefit investors and therefore be welcomed by the market.

The real-time market data content provided under the Free Prices Website Service comprises:

	Nominal price/closing price and last trade price for all securities traded on the Stock Exchange;
	Indicative Equilibrium Price (or IEP) and Indicative Equilibrium Volume (or IEV), which are calculated during the pre-opening trading session, for all securities traded on the Stock Exchange;
	Turnover value and volume of all securities traded on the Stock Exchange; and
	High/low prices of the day of all securities traded on the Stock Exchange.

"The Free Prices Website Service is designed to provide an additional delivery channel for Hong Kong securities market data. The service will be complementary to existing channels and market data services provided by HKEx-licensed real-time information vendors and help provide a greater variety of information services to meet different needs of investors," Bryan Chan, HKEx's Head of Information Services, said.

More information on the new service is available in the Investment Service Centre of the HKEx website.

The attachment below provides answers to some possible questions about the new service.

1.	Why does HKEx consider the six service providers will suffice for the public demand for free real-time Hong Kong stock market information?
	The Free Prices Website Service will provide basic market data and is designed to provide an additional delivery channel for Hong Kong securities market data. The service will complement existing channels and market data services provided by HKEx-licensed real-time information vendors by increasing the variety of information services available in the market to meet different needs of investors.
	Existing dissemination channels will not be affected by the new service. Any party satisfying the licensing requirements can still apply for a vendor licence from HKEx and provide market data services to investors. Indeed, there are now more than 120 real-time market data information vendors, including eight Mainland companies, collectively offering more than 700 securities and derivatives market data services. Market data services offered by the Mainland information vendors include streaming real-time securities market data provided on the Internet.
	The new service will initially be offered for two years to enable HKEx and the market to get familiar with the new service, and for HKEx to better understand its impact on the market in general and the other market data services currently provided by licensed information vendors in particular. HKEx has committed to closely monitor market reaction to the new service and review the service no later than the last six-month period of the two-year pilot period to decide whether and, if so, in what form the service should be continued.

2.	Was there any assessment of the likely impact on existing information vendors and revenue of HKEx?
	HKEx believes the basic snapshot price data that will be available under the new service are not readily substitutable for the great variety of information services being offered by existing information vendors. HKEx believes the impact on the business of existing information vendors and HKEx's information income should be insignificant.
	HKEx also believes that the new service should be beneficial to the Hong Kong securities industry as the service will help build greater interest in the Hong Kong market, particularly among Mainland users.

3.	Will HKEx further extend the data content of the Free Prices Website Service?
	The real-time market data content provided under the Free Prices Website Service comprises:
		Nominal price/closing price and last trade price for all securities traded on the Stock Exchange;
		Indicative Equilibrium Price, or IEP, and Indicative Equilibrium Volume, or IEV - which are calculated during the pre-opening trading sessions - for all securities traded on the Stock Exchange;
		Turnover value and volume of all securities traded on the Stock Exchange; and
		High/low prices of the day of all securities traded on the Stock Exchange.
	The new service does not include bid/ask quotation, market depth or broker queue information. HKEx has no current plans to extend the data content of the Free Prices Website Service. Source: HKEx, 02.10.2009

BM&FBOVESPA Authorizes New DMA Modality for its Derivatives Segment - DMA Model 3 - Direct Access without Technological Infrastructure of a Broker

The Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA will offer, beginning on October 19, a new Direct Market Access (DMA) modality connection to its GTS (Global Trading System), the Exchange’s electronic derivatives trading platform. DMA model 3 allows clients to directly access the GTS trading platform without the technological infrastructure of a brokerage house or an authorized DMA provider. As with the other available DMA trading modalities, direct access to BM&FBOVESPA and its order flow will continue to be authorized and monitored by a brokerage house.

Source:BM&FBOVESPA, 02.10.2009

Dark Pools in Danger?

Increasing regulatory supervision and calls for transperancy on one side and the threating proliferation of "unregulated and opaque" Dark Pool and crossing networks by large institutions, have increased the calls by exchanges and exchange federations to review regulation and even bann them.

While ther global debate is in full swing, China has clearelly distance it self from any alternative trading venues in the country and prohibited the access to any "non-transperent" trading venues like dark pools for it's QDII (Qualified Domestic Institutional Investors).

Below Article highlight the current trends and voices

What's the Matter with Dark Pools, 02.10.2009

Dark pools are on the regulatory front burner. They're seen as competing with the displayed markets, even as they've captured a segment of trading from the desks of broker-dealers' upstairs.

The Securities and Exchange Commission is now bearing down on issues related to trading in dark pools and how much flow can execute in individual pools without triggering obligations to the rest of the marketplace. To provide some perspective on this broader discussion....

London Stock Exchange to leave FESE 30.09.2009

But the move is a sign that a recent criticism by some of the world’s largest exchanges of the large banks’ off-exchange activities is not shared by some exchanges, which see their interests increasingly aligned with those same banks.

n a letter to Eddy Wymeersch, chairman of the Committee of European Securities Regulators, Ms Hardt said FESE believed the banks’ dark pools were “unregulated venues” operating with “full opacity”. The European equities market was “becoming a dealer market”.

Chi-X Global alleges ‘fear card’ move by ASX 30.09.2009

The head of Chi-X Global, the equities trading platform, on Wednesday accused the Australian Securities Ex­change of playing the “fear card” after the exchange’s chairman spoke of the dangers of allowing multiple share trading venues.

New ideas fail to lift mood over dark pools 24.09.2009

Yet even as dark pools continue to generate eye-catching ideas, controversy is raging over their very existence. In Europe, the issue is pitting exchanges against big banks in a new battle over control of billions of dollars in share trading orders.

Exchanges call on G20 to tackle dark pools 23.09.2009

The World Federation of Exchanges (WFE) has urged G20 leaders to press for market reform to tackle the uneven playing field and eroded price discovery it claims has been caused by the emergence of alternative trading platforms such as dark pools.

In a letter sent to Mario Draghi, head of the financial stability board at the Bank for International Settlements ahead of the G20 summit in Pittsburgh, the WFE calls for more uniform rules between exchange-traded and "less-regulated" markets.

The WFE warns: "The heightened opacity of certain market operations in many countries inhibits price discovery and may lead to negative outcomes, such as increased volatility."

"Taken together, the combination of the absence of a level playing field between execution venues and decreased market transparency is an unsettling development," says the letter, signed by William Brodsky, chairman of the WFE.

The exchanges call on G20 leaders to agree on ways to avoid "regulatory arbitrage" to ensure market participants do not just go to countries with weak rules.

Source: Finetik, 01.10.2009