China Replaces Securities Regulator Xiao Gang

Xiao Gang Replaced by Liu Shivu – China Securities Regulatory Commission

China has removed the head of its securities regulator after a stormy period in the country’s stock market, by appointing a top state banking executive in his place since leaders tend to move in restoring confidence in the economy. The announcement on the official Xinhua news agency recently trails a string of assurances from senior leaders succeeding the Lunar New Year holiday which China would be supporting in slowing economy as well as steadying its shaky currency.

According to media report, Xiao Gang has been replaced by Liu Shivu as the chairman of the China Securities Regulatory Commission – CSRC as it tried to tackle main volatility in its stock markets. Mr Xiao had been in charge when China’s market had crashed in mid-2015 at one point and the Shenzhen and Shanghai stock exchanges had lost around 40% of their value. Mr Xiao who had become the CSRC chair in March 2013 had faced criticism for mishandling the crisis. Under his supervision, the new circuit breaker mechanism of China which was designed to limit any market sell-off had been organized twice in January in reaction to the stock market drop though was then scrapped totally after it had cause additional panic.

Departure of Xiao – Not a Surprise

Zhang Kaihua, fund manager of Nanjing-based hedge fund Huyang Investment stated that the departure of Xiao was not a surprise after the recent stock disaster and this is a role which is vulnerable to public criticism since most of the Chinese retail investors are intended to lose money in such markets. Xiao and the CSRC had come under fire as Shanghai and Shenzhen stock markets of China had collapsed to about 40% within a few months last summer.

It was a further blow when a stock index circuit breaker that had been introduced in January to limit stock market losses had to be deactivated after four days of use since it was responsible for worsening a sharp selloff. The online media had labelled Xiao as `Mr Circuit Breaker’. According to Reuter’s reports, Xiao 57 had offered to resign after the `circuit breaker’ failure.A Shanghai-based analyst at Capital Securities Corp, Zheng Chunming had informed Bloomberg News that someone had to shoulder the responsibility after the suspension of the circuit breaker system.

Liu – Experience in Financial Sector

Mr Liu 54, had been the vice governor of China’s central bank, the People’s Bank of China, prior to becoming the chairman of the Agricultural Bankof China, which was the country’s third largest lender in 2012. On Weibo, the Chinese micro-blogging site, commentators recently played on Mr Liu’s name speculating if his tenure would bring about a `bull market’ of leave a `dead fish’ behind. Zhang stated that `Liu had a lot of experience in financial sector though there would be some policy uncertainty in the short term since it would take at least six months for the earlier banker to get used to his new role.

The managing director, sales trading at Haitong International Securities Group in Hong Kong, Andrew Sullivan said that removing Xiao had been mainly expected but by bring in the AgBank chairman; they are really not bringing anybody with a fresh market perspective but a political insider. Liu had spent major part of his career at the People’s Bank of China escalating to deputy governor, holding the post from 2006 till he left in late 2014 to head the AgBank.

Bitwalking Dollars - Digital Currency Pays People to Walk

Digital Crypto-Currency Generated by Human Movement

Digital crypto-currency generated by human movement has been launched and the bitwalking dollars would be earned by walking which would be different from other digital currencies like Bitcoins that are mined by computers. A phone application tends to count and verify the user’s steps with walkers earning around 1 BW$ for about 10,000 steps. Originally user would be given the opportunity of spending what they earn in an online store or trade them for cash.

Nissan Bahar and Franky Imbesi, the founders of the project have drawn over $10m of initial funding from mostly Japanese investors in helping to launch the currency as well as in creating the bank that tend to verify steps and the transfers.

Murata, the Japanese electronics giant is working on a wearable wristband which would be providing a substitute of carrying a smartphone and show how many BW$, the wearer seems to earn. Shoe manufacturers are also ready to accept the currency where a UK high street bank is in talks in partnering with the project at one of the biggest music festivals in UK, next year. The founders tend to have a track record of disruptive technology which could support developing nations as much richer ones.

Bitwalking Scheme Help in Transforming Lives

Last year, Keepod, a $7 USB stick which tends to act like a computer had been launched in Nairobi, Kenya. The purpose of Bitwalking is to take the benefit of the trend for fitness trackers by providing an extra incentive in keeping fit.

The global scheme intends to partner with sportswear brands, health services, environmental groups, health insurance firms as well as possibly advertisers who may be offered exclusive visions in the targeting audiences. In the near future, employers could be invited in taking part in a scheme which would be offered to their employees in encouraging them to stay fitter with the currency they tend to earn converted and then paid along with their salaries.

The average person in developed nations would be earning about 15 BW$ per month, though it is anticipated that in poorer countries, where the people would have to walk further for work or school or just to collect water, the Bitwalking scheme could help in transforming lives.

Education on How to Use Money in Additional Opportunities

The power Bitwalking could make in the developing countries is not lost on the founders and is one of the main reasons for creating the currency. In Malawi, one of the African nations, tojoin at the time of the launch, the average rural wage was just US$1.5 per day.

Karen Chinkwita, business advisor runs Jubilee Enterprises providing business guidance to young people in Lilongwe and has commented that there could be a temptation for some to walk rather than work. Most of them would prefer to earn more money and would do both. With some education one can teach them how to use that money in creating additional opportunities.

 Carl Meyer, Bitwalking manager for Malawi, has established the first two Bitwalking hubs in Ligonwe and Mthuntama wherein local people would be trained on how to trade the BW$ online for US$ or the local currency, Malawi Kwacha. Bitwalking has not formally released the procedure utilised in verifying steps but states that it uses the handsets’ GPS position and the Wi-Fi connection for the purpose of calculating distance travelled. The phone reports the type of movement and speed as measured by the accelerometer.

Tax and Encryption Rows Cast Shadow on UK Tech Boom

Tax/Encryption Commotion between Tech Giants/Government

Digital minister Ed Vaizey MP has stated that tax and encryption commotions between tech giants and government need not dominate the growing tech industry of UK. Vaizey had debated that critics in tech had not appreciated the intention of the bill, on the same day when critics on the Joint Select Committee had reported that the extension of digital surveillance powers of the government had to be fundamentally reconsidered.

He had informed WIRED that he `wanted it to be in partnership between the government and tech and often there is a binary approach. If one talks about the security services requirements, in a digital age, to be safe, you will be riding roughshod over protected principles in tech’. UK tech is a central part of the economy informed Vaizey emphasising that the latest Tech Nation survey which showed in digital was faster by 32% when compared to the rest of the economy.

Tech giants including Apple and Google said that the Investigatory Power Bill seemed to outlaw end-to-end encryption utilised by messaging services inclusive ofWhatApp and iMessage. Other critics have informed that the bill is `sloppily’ written and comprises of areas of considered vagueness

Digital Industries – Annual UK Turnover of £161 Billion

In response, Vaizey had repeated the assertion of the government that the Prime Minister David Cameron had not wanted to ban’ encryption but maintain powers over its use as well as the companies which tend to employ it. Vaizey had mentioned that they had the same debate on adult content and saw nothing wrong, viewingit as the role of a politician.

He would not let kids to read hard-core pornography when it is printed and that they need to do something to ensure that they don’t stumble across this on the web and should work together. He feels that they have made progress on that and hopes to have the same debate with regards to security. As the debates tend to carry on, the industry continues to grow. As per the annual Tech Nation report, formed by the government-funded Tech City UK industry group, together with the revolution charity Nest and GrowthIntel, digital industries tend to have an annual UK turnover of £161 billion

Digital Jobs Created in Unexpected Areas

Tech seems to be growing across the UK, not just in London; with the turnover growth for instance higher in Southampton than London as per Tech Nation. The details of the report as in 2015 had highlighted continued issues beyond the South East on England with infrastructure, access to funding as well as availability of expertise.

Chief executive of Nesta, Geoff Mulgan had mentioned in a report that it showed a number of digital jobs created in unexpected areas. He had also mentioned that the government had to do more in supporting the growth of tech in health, new industries like the Internet of Things as well as the ability of the UK in the development, retaining high value companies to work on artificial intelligence and machine learning.

He further added that `for all those though there is a challenge over the question of whether government is really using its policy power, purchasing power sufficiently, policy plays a big role in FinTech’ He is of the belief that several people in government would acknowledge that there is not the same equivalent alignment yet.

Buybacks Could Be the Stock Market Savior This Year

Dividend Issuance/Share Buybacks – Post-Financial Crisis

Companies may have to fend for themselves considering the gradually bleak in stock market returns. In 2016, retail investors have been bailing on stocks and pulling money from the domestic equity funds each week due to which the S&P 500 was down by 8% year till date before the market plunge on Monday.

This was a bad indication for a market that historically takes its full year hint from how it transpired earlier and companies seemed to be willing to step into the emptiness. Dividend issuance together with share buybacks were the major tailwind for the post-financial crisis bull market that would turn 7 years old in a month had it had managed to hang on through the present volatility.

Short historical valuations accompanied with cheap money had given rise to pushing companies to return trillions to the investors. Due to the blackout period over for buyback declarations, Wall Street is hoping for big things. Chief U.S. equity strategist at Goldman Sach, David Kostin, had mentioned in a note his team had sent to client recently, that early indication are that 2016 buybacks are `on pace to be one of the fastest starts on record’.

Companies Expressed Continued Commitment to Buybacks

So far the total announcement was $63 billion scarcely a month into the year, with Kostin considering that it is just the beginning. He comments that companies have usually expressed a continued commitment to buybacks, aware that the market weakness could be a reason for increase instead of narrowing their purchases.

 In 2015, buybacks had amounted to $724 billion, a year which had ranked second only to 2007 in total volume as per market data research firm TrimTabs. The year set a second record for several corporate money, utilised for buybacks as well cash takeovers at $1.41 trillion.A comparison with 2007 would not essentially promise well for the market taking into consideration that was the year wherein the house-led bull market started to crash.

However, the conditions of the market were different, where optimism was running high and equity allocations almost at 70% in 2007. Investors were cautious of the stock market with Goldman’s indicator putting sentiment at 2 on a scale of 1 to 100. Kostin had informed that it indicates a likely market rise of 4% in the following month depending on corporate buyers filling the void left by retail investors.

Management Optimism Important to Market

He further added that management optimism was important to the market since corporates tend to represent the main source of demand for U.S. equities beyond the present environment and the increase in buyback activity after 4Q earning season usually matches with the out performance of large stocks of buyback.

Classifying single companies, he said tend to poise for significant buybacks comprising of Gilead Sciences that specified $12 billion and 3M with $10 billion. Besides this, GE is composed for a hugs cash deployment for an unspecified mix of buybacks as well as dividends.

On the other hand Apple, Microsoft and Qualcomm too have substantial cash on hand to give on buybacks. Though the flow in buybacks has matched the sharp run-up in stock prices, investing money especially towards companies which tend to use their cash in that way has faced mixed success.

After the sell off, stocks may actually be cheap

Sell Off Wall Street - A Silver Lining

Wall Street is finally breathing a sigh of relief after the S&P 500 Index managed to hold on to its first weekly gain of the year. One prominent market watchers had commented that inspite of signs of strength; stocks are still in store for a thundering reset. The ruthless sell off Wall Street had faced during the last few weeks could have a silver lining.

 According to FactSet, the S&P 500 Index is presently trading at around 15 times the earnings; analysts tend to expect constituents companies to post over the next year. This reading is known as `forward P/E on the popular measure of valuation which is compared to a 15 year average forward P/E ratio of 15.7. The conclusion collected from historical comparison is based on the timeframe taken into account.

 It is worth observing, in this case that the current valuation level tends to represent the premium to the average of 14.3 observed over the past five and ten years periods. Since the firm in the meantime is probably using various earnings estimates, IQ of S&P Capital current forward valuation number is 15.7 though they also observed that was under the 15 year average.

Broad Market Trading in Abyss

David Stockman who was the former OMB Director under President Ronal Reagan, is of the opinion that the broad market has been trading in the abyss after breaking beyond 1,870 in 2014, since then with a meagre one percent return. He had commented that they had been there for 700 days and had something like 35 attempts at rallies where all have failed for the `four no’s’. For him the four no’s comprise of a combination of no escape velocity, no earnings growth, no dry powder from the central bank and no reflation.Accompanied together, it leads him to the belief that the U.S. economy seems to be on the point of a full blown recession.

He further adds that they are getting to a point where the chickens are coming home to roost and there is no help from the central banks and that is why these rallies seem to get weaker as well as shorter. He is of the belief that the overflow of easy money from central banks all across the world has shaped a credit crisis which is so severe that it could probable take years to come out of what it has created.

High Powered Money – Enormous Expansion of Credit

Market watchers have pointed out a stunning $21 trillion collective balance sheet built up all around the globe, up from 2.1 trillion only 20 years back. He has said that this is high powered money which has resulted in an enormous expansion of credit as well as financial valuation bubble.

Stockman has observed that the speedy increase of credit has caused debt all over the world of over $225 trillion and has mentioned that they `are at peak debt’. Stockman, at this point considers that the hands of the Fed could be tied up after being on zero interest rates for almost a decade. There is nowhere to go but negative and it is time to get out of the market completely.

The S&P 500 has been progressively in correction territory in 2016and the large-cap index closed the week at around 11% from its 52 week high. However Stockman is of the opinion that it could plunge another 30% from its present trading which takes it back to levels not envisaged since 2012.