Credit Markets in 4D: Double-dip & debt-deflation?

- "To clarify one thing right at the start: neither a (global) double-dip recession nor a debtdeflation process is our base-case scenario. The most likely path is one of sluggish growth, a scenario that would be – at least in theory – preferable for credits. Nevertheless, there are plenty of signs that the tremendous recovery is coming to an end. Hence, with a slowdown of economic activity ahead, investors will ask themselves “where will the slowdown stop – above or below the zero line”? It is this discussion in a fragile environment that we are concerned about, as investors do not wait to discount an adverse scenario until it really unfolds. Moreover, developments over the last couple of years have shown that investors do not necessarily have to be the “follower” of economic developments, they can be the “leader”. An adverse economic development can be triggered by an erosion of confidence in financial markets. The problem is that – in particular in the European periphery – governments lack the financial flexibility to weather another storm. Investors should not forget that the major ingredients for a Great Depression-like scenario were “too much debt” and “deflation” – two factors that are also hanging like a Damocles Sword above us in the current scenario."
- Macro Outlook: "Reducing macroeconomic disequilibria in the eurozone implies the need for significant internal devaluation: Lessons from the Baltic countries, which are undergoing a similar problem, suggest huge challenges for the economies."
- Micro Fundamentals: "With government yields at record lows and piles of cash on corporate balance sheets, the question is whether a new M&A boom is imminent. We take a look at leverage of European corporate bond issuers to gain more insight."
- Debt-Equity-Linkage: "M&A activity and the loan market are two sides of the same coin. As M&A activity remains subdued so does loan origination."
- Credit Quality Trend: "The default rate forecast is driving spreads, but what is driving the forecast? Is it really highly sophisticated economic forecast models?"
- Market Technicals: "Loan origination volumes grew rapidly before the crisis and collapsed afterwards, partly due to the turmoil in the CLO market."
- Valuation & Timing: "Our fundamental concerns are more on a mid-term horizon. But on a short-term perspective, investors' focus on eurozone periphery sovereign debt, the 3Q earnings season and the outlook for 2011 could present catalysts for a more pronounced spread widening in the coming weeks."
- Other Credit Markets: Derivatives: "The rapid growth in credit derivatives over the last few years enlarged the spectrum of hedging possibilities also in EEMEA credits, albeit the market is still small and in most cases illiquid. Securitization: Update on European and US housing market. EEMEA Credits: Two-speed recovery also bears some deflationary risks."
- Allocation: "We leave our defensive credit portfolio allocation unchanged."
- Model Portfolio: "Our financials portfolio outperformed the benchmark by 9bp, while the non-financials portfolio outperformed by 6bp."

Our review of recent academic research

- "Twice a year we compile a list of what we consider to be the most interesting journals on Quantitative Investment. We select articles based on whether the subject matter is interesting, and also whether they are representative of the trends that we are witnessing in the industry. While it is not designed as a comprehensive overview, we hope you will find them of interest."

Long double-dip risk, short periphery credit risk

- Maintain an aggregate long through core credits – "A muddle-through as opposed to a double-dip remains our economists’ central scenario and we believe core credit spreads already discount much of the near-term downside in the economic data."
- Short periphery corporate credits – "With spreads on periphery sovereigns within striking distance of their YTD wides, we think the recent performance of several periphery credits with a strong domestic bias is overdone. We would short these against a basket of credits that are either geographically diversified or based in core countries."
- Long Italy over Spain – "The spread between Spain and Italy is now at its tightest level since May. While Italy may carry a larger public debt burden, we think Spain faces far tougher dynamics. As such, we’d position for renewed divergence in CDS."
- Long Main over Crossover – "Crossover has outperformed Main over the summer, but now looks less attractive. Upside in HY rests on a rather bullish default rate scenario and continued inflows to absorb supply. We reckon Main is better positioned to weather a prolonged period of low growth."
- Long CDX IG over iTraxx Japan – "iTraxx Japan has outperformed other CDS indices this year for no apparent fundamental reason. Technicals may be strong, but with the Japanese economy showing renewed signs of weakness, we’d rather be long the CDX IG here."
- Long $ bonds over € bonds – "With the drop in the basis swap over the summer, several cross-currency switches from € to $ have started to work again."
- Long European over US credit card debt – "The spread between European and US AAA card debt has narrowed over the last year, but still looks excessive when you consider how similar the fundamental characteristics are."

India: Time to sizzle

- Initiate BUYs on Ruchi Soya, KS Oils; reaffirm BUY on Wilmar "We think Ruchi Soya’s targeted growth, with its exposure to palm plantation and dominant position in soybean processing and edible oil refining in India justify a rerating. KS Oils is the market leader in mustard and capacity utilisation should help it capture further market share, and thus we believe the correction due to corporate governance concerns (post the recent tax raids) is overdone and the stock is looking attractive, trading at just 9.1x FY12F P/E. Wilmar, we believe, is a good proxy to the Indian edible oil market with a leading presence through its JV. We initiate coverage on the sector with a BUY on Ruchi Soya and KS Oils and reaffirm our BUY on Wilmar."
- We expect industry growth of 7% and branded sales growth of 25% "Indian edible oil demand is set to rise from 16mn MT now to 30mn MT by 2020F, more than China’s market size today, implying a CAGR of 7%. More importantly, with increasing quality consciousness, rising incomes and consolidation, industry experts suggest branded sales are likely to grow at ~25-30% over the next few years. Branded sales comprise only about 25% of the total edible oil market in India now, but may grow to ~60% of the market by 2015F, as per our estimates."
- Incremental demand will be imported and has to be met by palm "Domestic consumption is expected to outstrip production growth (~2.7%), implying imports must grow at a much faster rate (~15%) to fill the demand. As acreage opportunities are limited in other crops, most of this demand growth will come from palm oil (~20% CAGR). Thus the players with refining / upstream exposure to palm stand to gain market share and volumes, in our view."
- Consolidation is the theme, with few players dominating the market "Due to the recent financial crisis, several poor harvests and reduction in import duties on edible oil, a lot of small scale solvent extractors and refiners have closed down, or been taken over by larger players in the industry. We expect this to be an ongoing trend; as larger players have several key advantages, such as being able to sustain a price war, access to cheaper credit from MNC banks and markets, lower marginal cost of production, and possibility of backward integration."

Asia Result Season: Cracks Among the Consensus Favourites

- ASEAN did better than North Asia, Korea was the worst, Philippines the best "Looking at the Q2/half-year results and ASEAN had more beats than North Asia. In North Asia, Korea disappointed (33.3% beat) while in ASEAN, Indonesia (48% beat) was the worst. Korea is a consensus underweight, and Indo, the top consensus ASEAN overweight now trading at 100% prem to the region on P/BV, could not manage to surprise. Japan also did well with 63% of companies surprising."
- The much-loved consumer sector failed to surprise, esp vs the likes of tech — "The consumer sector is now 3 stdev above mean valuations vs the market, a strong consensus overweight, and yet failed to surprise. Talk of expectations without surprises. Ex the Japanese consumer names, less than 50% of consumer stocks surprised. The under-owned and cheap sectors like tech or financials did much better and offer greater value. Top prize for surprises goes to the utilities."
- Follow through revisions post results have slowed — "This is to be expected now the low base effect has gone, as has much of the operating leverage. No surprise that for 2011 EPS forecasts are down to just 12%. The third year of the recovery is never a strong EPS growth year so no surprise there. In order to get operating leverage up again, we need to see a pick-up in capex. With capex to sales at a 20 year low, that’s not a big ask."

Commodity prices in the thrall of weather and economic sentiment

- "Commodities prices as measured by the CRB indices declined in August following two consecutive months of gains, but price action varied among subgroups and individual commodities. August's two main commodity price drivers were economic sentiment and the weather, which boosted certain commodity prices and suppressed others. Commodities are currently trading skittishly in response to volatile economic sentiment and unpredictable weather."
• "Crude oil prices declined under the weight of deterioration in economic sentiment. (Front-month WTI futures ended August at US$74.70/bbl, down from $78.95 at end-July.)"
• "Gold rose back above $1,200/oz against a backdrop of economic anxiety. (Spot gold ended August at US$1,246/oz, up from $1,169 at end-July.)"
• "Platinum continued to consolidate, edging downward in price. (NYMEX benchmark platinum futures ended August at US$1,523.50/oz, down from $1,576.80 at end-July.)"
• "Copper prices dipped but recovered on expectations of effective monetary easing. (LME copper ended August at US$7,442/t, up from $7,296.25 at end-July.)"
• "Zinc consolidated in a lateral range in sync with swings in economic sentiment. (LME zinc ended August at US$2,061/t, up from $2,022.50 at end-July.)"
• "Aluminum prices fell amid premium negotiations and deterioration in economic sentiment. (LME aluminum ended August at US$2,057/t, down from $2,173.75 at end-July.)"
• "Nickel prices softened as economic sentiment worsened. (LME nickel ended August at US$20,698/t, down from $21,146 at end-July.)"
• "Wheat prices initially rose sharply due to weather factors but retraced much of their gains. (CBOT wheat ended August at US$6.8575/bu, up from $6.615 at end-July.)"
• "Soybeans traded choppily, ending the month nearly unchanged in price. (CBOT soybeans ended August at US$10.10/bu, down from $10.12 at end-July.)"
• "Corn prices rose, lifted by inclement weather and increased demand for US corn. (CBOT corn ended August at US$4.3925/bu, up from $4.0675 at end-July.)"
• "Sugar prices rose again on anomalous weather. (New York sugar ended August at US$0.1932/lb, up from $0.1860 at end-July.)"

Lessons From Japan – Low Yields For Longer But Tail Risk Wider

- "Yield has been trending lower but the decline in implied vol is even more pronounced. As a result, the quality of carry (expected returns divided by implied vol) remains at very attractive levels."
- "We see a problem with tail risk. Implied vol tends to be more expensive vs future realized vols but it performs miserably when it comes to anticipating digital jumps or regime breaks."
- Conclusion – "We will buy duration on dips but look for cheap ways to own tail risk. In particular, we like buying OTM strangle or owning structures such as the progressive income locker."

The US and China look to be stabilizing

- "August releases in the US and China point to momentum stabilizing ..."
- "... as growth downshift continues across Europe and the rest of Asia"
- "Yen strength prompts further downward revision to Japanese growth"
- "COPOM revises neutral real policy rate lower, maintains holding pattern"

UK: Worse lies ahead

- "The economic and financial crisis of 2007-2008 triggered a deep recession in the UK. In 2009, GDP contracted by 4.9%, its sharpest post-war decline (see Chart 1). The British economy is emerging only very slowly from this recession, and is lagging about three months behind its main trade partners, the euro zone and the USA (Chart 2). In the fourth quarter of 2009, GDP grew by 0.4% q/q, after six straight quarters of contraction. By way of comparison, the 1973-74 recession in the UK lasted “only” three quarters and those in 1980 and 1990 both lasted five quarters (see Chart 3). Moreover, the main reason for the recovery in activity in the fourth quarter of 2009 lay in the slowdown in the reduction in inventories, with change in inventory accounting for GDP growth of 0.5 of a percentage point in that period. The acceleration of economic activity in the first half of 2010 (+0.7% q/q) came mainly from the strength of the manufacturing sector, the inventory cycle and global demand. However, the scale of the recession in 2008 is holding back recovery. According to the latest forecasts from the Bank of England’s Monetary Policy Committee given in its May 2010 Inflation Report, over the next three years production is likely to remain below the level it would have been but for the recession. On this point, estimates of the loss of production vary according to the model used. Thus the IMF 1 puts the average loss of production relative to the average trend at 10%, whilst the OECD2 expects a smaller fall, at around 2%. Meanwhile the Institute for Fiscal Studies3 puts the figure at around 7.5%, with the Treasury making a more conservative estimate of -5%. It is true that the contraction of the economy tends to be deeper and longer when it is accompanied by a financial crisis. Thus the fall in production is about twice the size after a financial crisis than in a standard recession."

Venture capital adds economic spice

- "Venture capital injects economic dynamism: An increase in VC investments of 1‰ of GDP is statistically associated with an increase in real GDP growth of 0.30 pp. Early-stage investments have an even bigger impact of 0.96 pp."
- "The direction of causality is not always easy to establish. Yet, tests for Granger-causality in the biggest market, the US, suggest that causality runs from VC-investments to growth. There is also substantial micro-evidence that supports this view."
- "Exuberances drive much of the correlation. Taking account of the dotcom boom and bust as well as of the financial crisis leads to lower coefficients."

FOMC Preview: Commitment Issues

- "The main consideration facing the Federal Open Market Committee when it meets on September 21 is whether to commit to a program of Fed balance sheet expansion. Recent economic data have given the FOMC time to postpone a decision on additional quantitative easing measures."
- "Two other stimulus options on the table are modifying the wording of the funds rate guidance in the FOMC policy statement and lowering the 0.25% interest rate the Fed currently pays on bank reserves. We expect neither to be adopted."
- "One change we do expect in next week’s policy statement is a subtle upgrade in the FOMC’s characterization of domestic economic conditions. The complexion of the economic data over the past three weeks suggests that the recovery is no longer slowing but is proceeding at a new, more subdued, pace."
- "Not much new is expected next week, but we suspect further action is coming in the next quarter or two. Given the likelihood that unemployment will remain unacceptably high for the foreseeable future, more quantitative easing is looking more and more like an agenda item for the Fed, whether it actually works to stimulate job growth or not."

Perspectives on the Japanese economy

- "The Japanese economy will not experience any noteworthy change in the next two years:
• Fiscal policy will stimulate household demand at least until next year. Although considered by the government, a sweeping tax reform (with VAT doubled in exchange for a cut in direct taxes) remains up in the air after the change in majority in the upper house. Without this reform, the deficit will widen further and drive the public debt towards 213% of GDP by 2012.
• Domestic savings will finance as usual this additional public debt, in particular corporate savings, and corporate debt will fall to 82% of GDP. Productive investment will admittedly increase, but far less than profits, which will be driven by substantial productivity gains.
• Population ageing will weigh negatively on residential investment, and positively on the unemployment rate. Nonetheless, the household savings rate will not decrease, as preference for the future remains strongly anchored in the behaviour of economic agents (real balance, substitution and Ricardian effects verified).
• Consumer prices will stop declining but nonetheless the country will not pull out from deflation (the GDP deflator will fall and the BoJ’s inflation target will not be met), and accordingly a tightening of monetary policy is unlikely.
• Such a growth regime (+1.3% of GDP in 2011; +1.7% in 2012) guarantees a stable and substantial current-account surplus (3% of GDP). Although desired by monetary authorities, the yen’s depreciation will therefore be jeopardised to a large extent. In view of the new Chinese exchange rate policy, an appreciation is actually far more likely."

Between a rock and a hard place

- "The euro area posted strong growth in Q2, but there are signs that the slowdown in the US and Asia is now beginning to be a drag on euro area growth. We project a slowdown with growth just below trend in the coming quarter."
- "Internal demand has started to gain strength, which makes the recovery less dependent on the pull from export markets. However, the recovery is not fully sustainable until we see declining unemployment and a stronger recovery in private consumption."
- "The unemployment rate has been stable at 10.0% since March. We project that unemployment will begin to decline soon albeit slowly, but this result is very sensitive to developments in labour-intensive sectors, such as construction."
- "The southern European debt crisis is not all over. Lower growth and higher spreads make a harmful cocktail. Targets are still achievable, but depend on reform willingness. Our primary concern is that public support for necessary reforms may falter."
- "The ECB is taking a pause on the exit path. The risk of an economic downturn has increased and the monetary analysis, which shows that loan flows have turned softer in recent months, does not support a more hawkish stance. We expect a first ECB hike in Q4 2011."

What happened at end-2009 and in early 2010?

- "At end-2009 and in early 2010, there was a drastic acceleration in global trade, which contributed to a significant recovery in industrial production and overall activity in exporting countries. To ascertain whether or not there will be a marked slowdown in global trade from the second half of 2010, we have to understand the causes of its very sharp growth from end-2009.
was it due to permanent causes: economic recovery in OECD countries, sharp growth in emerging countries?
or temporary causes; restocking after the substantial destocking in the aftermath of the Lehman bankruptcy?"
- "We show that in the United States, Japan, China, Asia and Latin America, imports increased much faster than what was justified by growth in demand excluding inventories, which indicates that they were linked to temporary restocking."

Slowdown, but no recession

- "The switch from an inventory-stimulus driven recovery to a demand driven recovery has proved tougher than expected, as job and spending dynamics remain weak."
- "In the coming quarters, growth will remain below par as the manufacturing cycle will slow and fiscal tightening will provide headwinds to final demand. However, the risk of recession is limited."
- "Economic growth will return to an above trend pace in 2011. Easy financial conditions, easier access to credit and pent-up demand will help the needed rotation towards more demand-driven growth."
- "Core inflation is expected to slow toward 0.5%, while headline inflation will move back into the 1.5-2% range. The risk of outright deflation remains relatively low."
- "Fed hikes have been postponed to H1 12 and the softer outlook increases the possibility of further Fed easing. Currently, we attach a 40% probability to the Fed resuming large scale asset purchases."

China banks: Stronger case for soft landing

- More concrete case for soft landing. "August macro data were encouraging. Two pillars of China’s economy, retail sales and industrial production, came in better than expected. Meanwhile, inflation remained manageable and looks set to decline in magnitude in 4Q10. China appears on track for a soft landing, and this bodes well for banks’ asset quality and earnings outlook."
- Bigger banks have less provisioning risk. "According to mainland press reports, banks may be required to hold provisions of at least 2.5% of total loans. This rumoured requirement will not impact the Big 4 banks, but will add provisioning pressure for smaller banks. We believe this requirement is too crude and unfair, since it does not consider NPL differences. Therefore, its implementation chances should be low. Nonetheless, we believe larger banks have better risk/return prospects amid this uncertainty."
- Turning slightly more optimistic. "We maintain our view that banking stocks will remain range bound in 2H10. Yet, given the encouraging August data and upcoming rights issues from the large cap banks, we believe banking stocks can trade towards the upper end of their ranges. Our top picks are large caps CCB and ICBC. We like CCB as it should be next in line to issue rights in October. Meanwhile, ICBC is a good laggard play, especially after the bank’s stellar 2Q showing."

China banks: Margin and maturity for 2010

- NIM: “the only hope” for positive surprises? "H-share banks reported a strong set of 1H10 numbers, with 20-60% YoY bottom line growth, and continued improvement in asset quality and net interest margin. Looking ahead, we believe sector loan growth should stabilize at ~19% for 2H10 and decelerate in 2011, while NPLs and credit costs are both at low levels with high upward risks. Thus, any positive earnings surprises should be mainly driven by NIM. We analyzed various drivers of banks’ NIM, and concluded that the room for sequential margin recovery is very limited."
- Quantifying the key NIM drivers "H-share banks’ NIM recovered by ~31bp on average from 2Q09 to 2Q10. Based on our analysis, the shift from discounted bills to non-bill loans was the biggest contributor for small banks’ NIM recovery (15-25bp), while the higher LDR helped NIM by ~10bp at BOC, CMB, and BoComm. Longer loan maturity, shorter deposit maturity, better loan pricing, and recovery in treasury yield also boosted margins, though to a lesser extent."
- Expect margin to peak and stabilize "The margin drivers appeared to be running out of steam for 2H10. Discounted bills as % of sector loans was flattish in the past 2mths (-0.2ppt), and may start to rebound as credit demand weakens. LDR in 2H10 should be lower than in 1H10. The maturity mismatch of sector loan-deposit rose to record high levels, and is facing the risk to reverse. Large banks’ margin should be largely stable in 2H10, while CNCB and MSB could suffer margin decline due to the time deposits they gathered in end 2Q10. CMB’s NIM is the most volatile, which may continue to rise in 3Q10, but is vulnerable to any decline in discounted bill yield."
- 1H10 results recap "The big two state banks continued to lead on profitability, provision buffer, and capital. Joint-stock banks enjoyed higher NIM than large banks, but lagged on profitability, due to their relatively low fee income and high operating costs. Loan growth was in line with regulatory guidance, with the property sectors being a key growth driver. NPL ratio reached record low level and credit costs declined further. CMB and MSB appeared tight on core capital, despite their recent capital raising."
- Uninspiring stock performance YTD, watch October "H-share banks' stock prices performed in line with the markets YTD. Most banks traded flattish (except for ABC and CNCB), and the performance converged. We reckon investors are attracted by China's macro story, the banks’ strong balance sheets, and undemanding valuation. Nonetheless, confidence in earnings is low due to the policy risks and asset quality concerns. We believe late October could mark the next milestone, when we may get better clarity on provisions on LGFV l oans, any new property tightening measures, and margin trends in 3Q10."

China banks: We don't expect CBRC to ask for maximum countercyclical capital buffer in possible new capital norms

- "Possible China version of Basel III. 21st Century Business Herald reported CBRC is considering China version of Basel III including capital, liquidity and leverage ratio requirement. Potential new capital requirement include a minimum core tier-1 ratio of 6%, tier-1 ratio of 8% and CAR of 10%. Banks important to the system may need 1% additional capital. In addition, CBRC may ask for a counter-cyclical surplus CAR in the range of 0-4%. System-important banks would need to achieve this by 2012YE while others would need to comply by 2016YE."
- "Capital and liquidity norms are already very good in China: By international standards Chinese banks already have one of the best liquidity ratios and one of the strongest deposit funding. The existing capital ratio (common tier-1 ratio at 9.5% post rights offering to be completed in the next 6 months) is also well above the global BASEL III requirement. Post the announced equity issuance which is scheduled to be completed by 1Q11, tier-1 equity to assets is at 5% or above. Meanwhile, capital structure is simple, with no hybrid tier-1. We also see room to further boost CAR by about 2.5ppt purely through tier-2 debt (capped at 25% of tier-1 capital)."
- "Further big capital raising unlikely to be accepted by other key government entities. A potential capital deficit depends on the level of counter-cyclical surplus capital requirement. We however believe it’s unrealistic for CBRC to ask for a 14 % CAR, since this means over Rmb1trn capital raising, which we think would be an impossible amount to raise. Moreover, further big capital raising is unlikely to be supported by other key ministries. If CBRC asks for up to 13% CAR for the state-controlled banks, and 12% for other banks, and still allows tier-2 debt to be 25% of tier-1 capital, then we think there will still be limited equity shortfall as capital shortfall may be covered by tier-2 debt issuance."
- "Surplus capital is linked to excess loan growth under Basel III. We think it’s misleading to add maximum surplus capital buffer to mini requirement at all times. The original Basel paper (16 July) shows surplus reserve is linked to credit cycle or credit multiplier (namely credit growth/normal GDP growth). As we expect credit growth to further slow and credit growth/normal GDP growth at 1-1.2x in the next 2- years, we don’t think CBRC will ask for 15% CAR which is based on maximum surplus capital."
- "Stay defensive, policy risks prevents re-rating. Despite solid operating performance, we agree policy uncertainty is looming. While policy risks may not lead to material earnings or ROE impact and may not even be realized, investors do not like uncertainty. In view of the regulator’s “interventionist” approach, together with what can at times be a noisy cynical media and public calling for “social service”, investors may be unwilling to pay higher multiples. We advise investors to stick with bigger banks whose earnings and ROE may be more resilient to policy risk.."

China banks: Medium-term structural challenges

- China Financials Forum: Addressing medium-term structural challenges, opportunities "We hosted the Caixin China Financials Development Forum featuring policy makers such as NDRC/PBOC/CBRC/CIRC on Sept. 9, and the GS/Gao Hua China Financials Corporate Day on Sept. 10 to discuss interest/exchange rate reform, LGP loan risks, property tightening, insurance sector growth / regulation, rural finance and land reform outlook, and consumer protection."
- Interest rate reform: A med.-term challenge, not an imminent risk "Speakers highlighted the need to accelerate interest rate and exchange rate reform in the light of current negative real deposit rates. Key takeaways: 1) interest rate reform is a medium-term challenge for banks, but likely a gradual process rather than an imminent risk; 2) some NIM pressure on big corporates and mortgage loans is inevitable, but should be mitigated by: SME/other corporate loan/deposit spread rise; China’s already relatively low NIM vs. EM countries (e.g. Brazil, Indonesia, India, Turkey); and China banks’ low P/B vs. current ROE, which has partly discounted NIM decline risks, in our view."
- LGP loans: Not a systemic risk, but long-tailed on fiscal reform "Speakers underlined the rich resources, assets, and revenue collection rights of many Chinese local governments, but pointed out potential NPLs from highly leveraged LGPs. Municipal debt issuance will not happen for a while."
- Property tightening: Commercial property less a risk for now "Speakers believe commercial property risk is not a big issue so far given its early stage of sector development, low portion of rental vs. ownership, and property tax applied to reduce speculation, etc."
- Rural finance: Rural housing land reform to be trialled "Speakers believe rural finance should be viable given the high pricing power if risks are well managed. We believe rural housing land reform (piloted in rich areas) could have a significant positive impact on farmers’ personal wealth, consumption and financing activities."
- Insurance: Carefully managed pricing deregulation process "Speakers are positive on the growth potential of insurance. They believe regulators will maintain tight control on solvency margins, and life product pricing deregulation will be carefully managed to avoid any negative impact."