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Paulson, Wu End Two Day Talks - Expands US Investment

Wednesday, 23 May 2007 20:48:32 GMT  |  Richard Lee, Currency Analyst

 

Paulson, Wu End Two Day Talks – Expands US Investment

After two days of talks between Chinese and US officials, little was left resolved on the currency foreign exchange policy.  Instead, Chinese officials attempted to appease US Congressman, opening up both the financial services and aviation sectors to foreign investment.  Notably, for the financial sector, China opened up quotas that previously restricted the amount of stock allotted to international investors.  In addition, foreign banking institutions will be able to issue yuan denominated credit and debit cards to the consumer level.  In aviation, both sides agreed to more than double the number of daily flights between to and from the US by the year 2012.  Both plans were considered a vast improvement to deepen ties with the US and China, however, for the most part remained “incremental” as per US Treasury Secretary Paulson.  It seems that the one thing policy makers wanted, remained off the table as the pace of change was still under contention.  “They agree with us on principle, the question is the pace of change…we’re impatient”, noted Paulson at a press conference in Washington.  Incidentally, the talks spurred further speculation on another round of widening as People’s Bank of China Governor Zhou Xiaochuan noted plans for further flexibility in the yuan.  As a result, the yuan traded at a record high against the dollar, appreciating to 7.6540 in the overnight session.

 

Singapore’s Inflation Slows

Consumer prices in Singapore dropped for the first month in three as electricity tariffs were lowered along with prices for transportation and communication.  For the month of April, the consumer price index rose by 0.6 percent on the year on year comparison, lower than the previous month’s gain of 0.7 percent according to the Department of Statistics.  Incidentally, the lower than expected report lent some strength to the underlying Sing dollar as it shows inflationary pressures remaining in check on an appreciated currency.  The effects are widely in line with the central monetary body’s forecasts as policy makers continue to reaffirm its three year policy on allowing the local currency to appreciate.  As a result, the underlying dollar rose on the day against the US greenback, breaking a six session losing streak.  For the record, the 0.5 percent dip in transport and communication costs were widely offset by a 1.2 percent advance in food prices.

 

Singapore Exchange Looks To Attract Listings

In a move similar to the recent round of consolidation and reconstructions happening around the world, the Singapore Exchange announced that it has plans to change the rules and bylaws governing the listing of companies on the exchange.  A move that will hopefully improve the competitiveness of the regional stock market, exchange officials are revising the minimum size of companies as well as requiring a sponsor for issues listed on the smaller Sesdaq.  With the revised rules, companies can now list on the Sesdaq within four to five weeks of notification, a significantly shorter term compared to the 17 weeks previously stipulated.  Incidentally, the move comes amid an announcement from the Tokyo Stock Exchange on May 22 that the TSE will establish an office in Beijing in order to encourage Chinese companies to list on its exchange.

 

Stocks Markets Continue To Remain Mixed

Further profit taking weighed heavily on the Hong Kong’s Hang Seng index, as the overall benchmark fell to lowest in more than a week.  Leading the decline on the day were shares in Sino Land Co. and China Life Insurance.  Cnooc shares slipped as crude declined on the session.  All in all, the benchmark dropped 44.95 points to close 20,798.97.  The Singapore Straits Times index fared better, adding 19.19 pionts to close at 3,559.01.

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