Of all major economies, China remains to be the most resilient. The GDP for 2017 is expected to grow robustly in spite of tighter financial conditions. The full story on Reuters:

China’s economic growth is expected to top the government target to reach 6.6 percent in 2017, tempering initial worries of a sharper slowdown as Beijing walks a policy tightrope with its quest to crackdown on financial risks and limit damage to the economy.

An upturn in global demand for Chinese goods could cushion the impact on growth from curbs on property and debt risks, which have seen a modest tightening in monetary conditions, economists said.

The government has targeted annual growth of around 6.5 percent this year, down from the 6.7 percent pace clocked in 2016 – the slowest in 26 years – as authorities stepped up their campaign to wean the economy off its reliance on years of cheap credit.

Growth in the world’s second-biggest economy is projected to continue cooling to 6.3 percent in 2018, the Reuters poll of 65 economists showed.

The forecasts for this year and in 2018 were both more optimistic than the polling results three months prior, as a slew of official data in recent months eased worries about a sharper downturn in China’s economy.

“We raised our forecast because the economy has fared much better than expected in the first half of the year,” said Betty Wang, a Hong-Kong based senior economist with ANZ Research.

China’s economy grew a surprisingly solid 6.9 percent in the first quarter, buoyed by a gravity-defying property boom and higher government infrastructure spending which helped boost industrial output by the most in over two years.

However, the impact of a cooling property sector on economic growth is starting to show up, as fixed asset investment growth in May slowed more than expected.

 

Tightening Regulations

The Chinese government has sought to tame soaring property prices by slapping a flurry of restrictive measures, stoking fears of a market collapse as real estate is a major contributor to economic growth.

A regulatory crackdown on unscrupulous lending and a modest shift to tighter monetary condition have fueled funding costs, as authorities seek to contain a dangerous build-up in debt that has ballooned to 277 percent of gross domestic product.

Yet, policymakers have been treading captiously in tapping the brakes ahead of a key party meeting in the autumn at which there will be a change in the top leadership.

The People’s Bank of China (PBOC) held back from matching a U.S. interest rate hike in June despite capital outflow pressures, and has injected liquidity into the market to avoid a credit crunch.

While growth in the second quarter is expected to have eased slightly according to the poll, solid exports in recent months have helped the economy weather tighter financial conditions.

Data on Thursday showed China’s exports rose a stronger-than-expected 11.3 percent in June from a year earlier.

“There are actually overshooting risks in the second half even as growth is set to be slower,” said ANZ’s Wang.

On a quarterly basis, China’s economy is expected to slow to 6.8 percent growth in the second quarter, 6.6 percent in the third and 6.5 percent in fourth quarter, the poll showed.

Still, analysts remain cautious about the longer-term economic prospects of the Asian giant. Property curbs and higher borrowing costs could gain more traction over the coming quarters.

“You don’t feel the pain initially,” said Julian Evans-Pritchard, China economist at Capital Economics.

“Companies can make do with less credit for now, but then lending starts to slow, as monetary conditions are still tighter, and that will eventually start to hurt,” he said, adding that the transmission time could take up to nine months.

Analysts believe the PBOC will keep benchmark lending rates unchanged at 4.35 percent through at least the fourth quarter of 2018, the Reuters poll showed.

They have pushed back their expectations on a cut in the amount of cash that banks are required hold as reserves, or the reserve requirement ratio (RRR).

The central bank is expected to cut the RRR by 50 basis points (bps) in the first quarter of 2018 to 16.5 percent, versus the April poll’s prediction for the 50 bps cut to be made in the fourth quarter of this year.

Analysts also expect annual inflation to be more muted at 1.8 percent in 2017, down from the actual 2 percent rate in 2016, probably reflecting a drag from low food inflation.

Building capital for a business venture isn’t always easy, especially when such venture will cater to a niche market. In rapidly developing Asia, entrepreneurs have begun seeking non-traditional options to finance their startups, adapting the same trend that made the West the economic powerhouse that it is now. As a result, there is currently an alternative financing revolution happening in the region. Here are more insights from Forbes:

In more ways than one, alternative finance has made borrowing simple, swift and suitable. Over the last few years, alternative finance providers have grown in number and garnered significant acknowledgement and traction from stakeholders such as regulators, venture capitalists, banks, enterprises and investors. They provide financing outside the parameters of traditional lenders, most commonly banks. Breaking it down even further, alternative finance includes domains such as crowdfunding, peer-to-peer financing, and invoice financing.

 

The rise of alternative lending

The sudden rise of alternative finance can be attributed to two reasons. First, the inability of traditional financial institutions to cater to certain segments of the market which need access to secure financial services. And second, because fintech firms have recognized these gaps, successfully experimented and developed solutions to fix these gaps with minimal red tape. Based on data from The World Bank, more than 200 million micro, small and medium-sized enterprises (MSMEs) in emerging economies lack adequate financing, due to lack of collateral, credit history and business informality.  Until recently, alternative finance platforms have witnessed staggering success and even reached a stage of maturity in the Western markets, particularly in the U.K and U.S.

 

In recent times even the East has also joined the ranks and given the alternative finance industry a major boost. Countries such as China, Singapore, Hong Kong, and most recently Indonesia, Malaysia, the Philippines, and India have displayed a tremendously positive response to several platforms providing alternative forms of finance to enterprises and individuals. Rightly so, as Asia is home to a population of 4.4 billion and 5 key financial centers of the world. Aside from a considerably large consumer base and a relatively stable political system, most of the Asian economies emerged from the 2008/09 financial crisis in better shape than its western counterparts. The tightening of credit across several banks across the region has played a pivotal role in the growth of alternative finance in these markets.

 

A special mention must be made of the Asian regulators which are actively encouraging and supporting the growth of alternative finance in their respective countries. Singapore’s regulator has set aside $225 million to develop and support fintech projects locally. It has also eased the rules for financiers to increase the level of unsecured lending. The Monetary Authority of Singapore has even housed an innovation lab called Looking Glass within its building. Hong Kong Monetary Authority has created a system which brings banks, financial technology platforms and the regulator itself to collectively brainstorm and experiment on developing innovative solutions. In the same manner, China has become the largest P2P market regionally thanks to its government which encouraged the growth online finance to cater to the underserved market instead of solely relying on local banks. Japan has taken a step further to collaborate at an international level by partnering with the Financial Conduct Authority to encourage a cooperation between financial technology platforms in Japan and in the U.K to be able to operate in both countries.

 

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As Warren Buffet puts it, value investing’s central contention is summed up in the maxim, “Price is what you pay. Value is what you get.” Know more by reading this article on Investopedia:

Tuesday, May 9 marks the 123rd birthday of the late Benjamin Graham, who is commonly known as the “father of value investing.” How would he feel if he could survey the value investing landscape today?

He might be pleased to hear that his disciple Warren Buffett, who has hailed Graham’s 1949 book “The Intelligent Investor” as “the best book about investing ever written,” shepherded Berkshire Hathaway Inc. (BRK-A, BRK-B) to a 1,972,595% return from 1964 to 2016 (compared to the S&P 500’s 12,717%).

But Graham would also have plenty of cause for concern: according to a recent paper by U-Wen Kok, Jason Ribando and Richard Sloan, value investing is in a bad way

“Formulaic Value Investing”

In 1934 Graham and David Dodd wrote that thinking about book value – a firm’s net assets – as being the same as intrinsic value is “almost worthless as a practical matter.” To be sure, book value is one of value investors’ favorite metrics; Buffett lists Berkshires’ return in terms of book value (884,319% since 1964) right alongside its share price return. But Kok and her colleagues point out that self-described value investors increasingly content themselves with analyzing a firm’s value using book value alone or in combination with a few other narrow metrics, such as trailing earnings per share (EPS) or expected ones.

Such “formulaic value investing” tends to select firms with inflated fundamentals, the authors find, rather than underpriced shares. Value investing has “taken on a meaning we don’t think Graham and Dodd intended,” Ribando told Investopedia by phone Monday. And people are losing out on potential gains as a result.

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