JP Morgan’s Great Loss

JP Morgan has always been considered as the strongest and most solid bank in the US financial market. However, recently, it suffered a loss of more than 2 billion dollars in 6 weeks in the “London Whale” case.

                     (Source: http://www.allvoices.com )

Last year in September, the same case happened in Swiss Bank, causing a loss of 2 billion dollars. After only half of a year, JP Morgan trod the heel.

The primary reason for the great loss may lie on the mistakes of the traders since these banks highly rely on the ability of the traders. Nevertheless, the banks should also be responsible for the case as they lack the general management of their traders.

The great loss of the JP Morgan leads to a variety of effects on the financial market.

First, the stock price of JP Morgan fells sharply. Just two days after the loss, the stock price dropped by 12% and the market share declined by 1.88 billion US dollars. After then, it encumbered the Dow Jones Index by 25 last Friday. Other banks, including Morgan Stanley, Goldman and Citi, also dropped by more than 3%. The decrease of the financial sector may be due to the fear of stricter regulatory policy carried out by the government.

Second, the loss may strongly affect the financial market, even lead to another crisis. Fitch has already downgraded the rate of JP Morgan from AA- to A+. If the case were not getting better, it could lead to a very serious situation. Under the background of economic crisis, the US still needs five to ten years to recover. The great loss blocks the recovery process. To solve this problem, the US government may strict tighten the regulatory policy on financial market to lower the risk.

Third, the case will also endanger the Obama’s election. Obama has already urged the government to tighten the regulatory policy on financial market. However, if the case were not dealt with properly, Obama might lose the favor with the voters. Remember that four years ago, it was Obama who took advantage of the subprime fallout to lead the voters against the Republicans. Obama would definitely not want the same history happening again on himself.

New Fortune 500

The Fortune Magazine has just established the new rank of the fortune 500. The oil giant, Exxon Mobil is ranked top for 452.9 billion US dollars while Wal-Mart comes off second best for 446.9 billion US dollars.

Exxon Mobile ranks top

(Source: money.cnn.com)

Although there are still some affects due to the economic crisis, the US economy bottoms out gradually. The total income of the 500 enterprises on list has increased by 9% in 2011 compared with the former year.

It is worth mentioning that the technology giants are taking more positions in the new rank. Benefiting from the great sales of iPhone and iPad around the globe, Apple has raised its rank from 35 to 17. The profits also increased by 85% to 25.9 billion US dollars, making it the second profitable enterprise in the US.

Apple raised its rank from 35 to 17.

(Source: wikipedia.org)

Except for Apple, other technology giants, such as Google, Facebook and Amazon also promoted their business by their great innovation abilities.

In the new century, with the great development of technology, these companies have become the hottest corp in the world. First, the growing needs of people rely on these technology giants. People need new set of electronic devices to conduct their daily living in the new world of technology. Second, these companies always bring about new things and new technologies to reality. The innovation ability leads to the booming of the technology giants. Third, these companies seize the mind of consumers. They conduct a lot of researches to develop new features of their products to meet the demand of the consumers.

However, Twitter and Yahoo are not that remarkable on the list. Although they are also technology companies, they lack the innovation ability and have defects in their business pattern, which lead to the unsuccessful result.

While the technology companies are developing at an alarming speed, traditional financial industries like banks are in their tough period. The highest rank of bank companies belongs to Bank of America, ranking 13 on the list. The second highest is JP Morgan Chase, ranking 16. These are far below the electrical technology companies and energy enterprises. This may be because of the impact of economic crisis.

Overall, the general debility of these corps is decreasing compared to the former year, which indicates that the economy of the US is recovering.

Bank Competition in Southeast Asia

A competition has just set on fire. To expand the scale, DBS Group Holdings LTD., CIMB Group Holdings Bhd. and other banks in Southeast Asia start on merger on a large scale.

Unlike international banks, the regional banks are less affected by the economic crisis. In recent weeks, these banks have made deals on merger over 8 billion US dollars. DBS will purchase the PT Bank Danamon, the fifth largest bank in Indonesia, for about 7.3 billion US dollars. CIMB also purchased the Philippines Bank of Commerce for 2.9 billion dollars.

DBS Group Holdings Ltd.

(Source: businessweek.com)

Before these mergers, there happened a series of purchases within Asia. They aim at the growing amount of consumers and enterprises of the 10 countries in the Association of Southeast Asian Nations. These countries have a large amount of populations and of course, a large amount of opportunities.

PT Bank Danamon will be purchased by DBS.

(Source: businessweek.com)

The mergers will lead to great changes within the Southeast Asia. First, these banks can strengthen themselves and therefore they will be able to compete with those existing large international banks, such as Citi Bank, JP Morgan Chase Bank, etc. Second, the enhancement can also improve the current economic situation after the economic crisis. However, this can also cause some problems. For instance, overheated merges can lead to the appearance of monopoly, causing a lot of problems in the Southeast Asia economics.

Before the purchase of the Philippines Bank of Commerce, the CEO of CIMB, Nazir Razak, declared that only a few enterprises were prepared for the development of unified economic zone because most of them still doubted about the formation of such kind of zone.

The Southeast Asia is developing at an alarming speed.

(Source: apcss.org)

After the Asian debt crisis in the 1990s, the market in Southeast Asia has been ignored for a long tome. However, as can be seen from the competition in recent weeks, more industries have focused on the unification of Southeast Asia and considered it as a great opportunity. I think the competition will still promote the unification of the area, including Indonesia and Thailand, as there are too many small banks existed.

The Great Purchase of Bright Diary

At the beginning of this month, Bright Dairy, a diary and food company in China, announced to take over 60% of the stock of Vita Wheat, which worth totally 1.2 billion pounds. Lion Capital will keep the other 40% of the stock.

This has been the largest oversea purchase ever in Chinese food industry. The purchase may also affect the food processing industry in China.

The Bright Dairy (Source: hudong.com)

According to Eastmoney, the products of Vita Wheat are sold over 80 countries. Except for the wheat products, it also owns Alpen, the bestseller brand of oat in the UK. Vita Wheat has a history of 70 years, starting from 1932. 

Since the Vita Wheat is the second largest manufacturer of cereal and grain food in the UK, it has the same strategic direction with Bright Dairy. Therefore, Bright Dairy can learn the manufacturing, researches and developments, marketing and also other experience of the Vita Wheat.

Product of Vita Wheat 

(Source: foodiewanderings.blogspot.com)

What’s more, this purchase can also accelerate the expansion of Bright Dairy in European countries. In this way the market share will also be promoted. The merger also promotes the economic benefits, enhancing the brand awareness.

Although the purchase may bring about some future prospects, there are still some obstacles in this activity, including law, political and financial problems. For example, the local population may resist the coming of external enterprises, so the Bright Dairy has to take the cultural issues into account.

On the other hand, there are still risks on marketing. First, the marketing talents are not suitable for the UK market, which will lead to a decrease on the sales of the wheat. Second, the exploitation is different in UK than in China, so it may reach a limit. Third, the pricing of the products should be proper to attract more consumers.

The local market should always be concerned.

(Source:johnmariani.com)

To enlarge the economic benefits, the integration after the purchase is very important. The Bright Dairy needs to combine the two enterprise cultures together. Some proper methods include increasing the benefits for workers, solving the problem of unemployment and promoting environmental protection, to build up a good corporate image to workers and consumers.

Campus Crisis at International Students

Early this month, two Chinese graduate students from USC (University of South California) were killed in their car. They were travelling around US via a secondhand BMW. When they stop the car and relax themselves, a robber uesd gun to demanded the couples to get out of the car. Lack of experience, these two students refused to leave the car. The reaction made the robber angry and shot them to death.The news is like a bomb, leading to a wide range of discussions.

Only two weeks later, two Chinese students in Australia were robbed and attacked on a train back to their house. Many Chinese students, who prepare to study abroad, begin to hesitate “is it safe abroad”?

Two students killed in the USC case. (Source: aboluowang.com)

Actually, in general, the public security in these developed countries is much better than in China. However, the two cases warn us that the situation is not ideal. Many local residents and also many Chinese people consider study-abroad students to be rich and wealthy. Although the fact is not like that, this concern has deeply injected in these people’s minds.

In the USC case, most people focused more on the BMW car rather than the case itself. In fact, the BMW is a second hand vehicle only cost 10,000 dollars.

The BWM in the case. (Source: sina.com)

The two cases also have negative effects on the educational popularity in these countries. First, although these students may hesitate to study abroad, most of them may still apply for these universities. However, after they are admitted, they may not come to study. Thus, both the quality and the quantity of the students will decrease. Second, if the amount of students were decreased, the tuition income will also decrease. Especially for public universities in the US, they gain fewer funds from the state government because of the economic crisis and the tuitions from international students can serve as a supplement to the university funds. Third, the decrease in Chinese students will affect the diversity on campus. The degree of diversity is very important for a university because it will affect the reputation and fame. Finally, international students are fresh troops in research programs in these universities. The decrease will also affect the research environment.

Campus Crisis (Source: roanoke.com)

Hopefully, the US and Australia government can improve the public security and assure the safety of students. The campus crime is a tragedy for students. 

Why studying abroad?

It is noticing that there are more students each year from Asian countries like China, India and Korea studying abroad. Most of them like to choose undergraduate or graduate institutes in developed countries, such as the US, the UK, Germany, Japan, etc. Why are they doing so and is it a good decision to study abroad?

(Source: av.net.cn)

First, students studying abroad want to increase their experiences. Although the development of Internet and media has allowed people to get to know the foreign cultures without even leaving the room, it is absolutely a different experience to live in a foreign environment. One can never really understand the humanity and culture through Internet and media. Life of studying abroad can also broaden horizons, improve critical thinking and develop a sense of responsibility. Students have the opportunity to truly understand the meaning of humanity and the society.

（Source: edu.longhoo.net)

Second, the education system is more developed. On one hand, the educational concepts, facilities and methods are more improved in developed countries. Students can experience more in a university with qualified apparatus. On the other hand, there are more majors and directions. Some majors, such as biomaterials and clinical medicine, depend on the quality of facilities. Students can learn more on these directions when studying abroad.

Chinese students are preparing for food. (Source: cssa.china.edu.cn)

Third, these students want to make some changes. Some of the students who decide to study abroad, already have a very high diploma or a decent job at home. However, they just want to be more competitive. Therefore they choose to improve themselves by studying abroad.

Actually, the developed countries usually welcome these students to study in their nations. On one hand, the international tuitions, which are often higher than the local tuitions, can serve as a supplement to the funds of the institutes. On the other hand, they can also keep the academically successful students within the nation by providing jobs to them.

Facebook's next move: China?

        Facebook, the most popular social networking site around the globe, still hasn't got the approval to launch itself in mainland China. The reason may be complex, but one thing is certain, the Facebook is still changing its strategy to step its feet into the eastern nation. On an interview in 2010, Facebook CEO Mark Zuckerberg stated, “How can you connect the whole world if you leave out 1.6 billion people?” to show his interest in the Chinese market. 

(Source: Mark Zuckerberg on Facebook's Strategy for China)

         This is not the first time Zuckerberg shows his interest in China. In 2010, he went on a personal trip to China, visiting three internet giants in China: China mobile, Baidu and Sina. His action had set off a frenzy of speculation in Chinese internet market. However, the failure of american internet companies like ebay, Yahoo and Google also warned the young man that the road was not that simple.

        Actually, if the Facebook successfully entered China, it would cause a lot of changes. First, this will be the first time most Chinese netizens directly communicate with people out of the nation. Before 2003, the degree of openness of internet in China was rather high. Then, after 2003, the Chinese government begun to control the internet use, preventing Chinese netizens to get in touch with western electronic media. However, the internet market and technology improved at an alarming speed during this period. As a result, many of the Chinese netizens do not have the experience to communicate with foreigners directly themselves. 

（Source: umiwi.com)

        Second, the Facebook will have to compete with the local social networking site. Because of the absence of Facebook in China, several local social networking sites are now very popular in China, such as Renren, Kaixin and Douban. Especially for Renren, it is a social networking site based on the “oldboy network”, with a current number of users over 5 million. It is rather hard for Facebook to shake the standing place of Renren. Therefore, it has to think of other strategies. 

(Source: renren.com)

        Lastly, the business pattern of Facebook will collide with the development patterns of internet in China. Many services provided by Facebook, the apps for example, do not quite match with the pattern in Chinese network. Whether Facebook will change its pattern to appeal to the Chinese internet, or Chinese internet will seek a better way to fit with the foreign service structure, only time can tell.

        At present, Chinese netizons have to use proxy to log on Facebook. We believe that one day Facebook can break through the "high wall" set up by Chinese government and enable Chinese users to travel in the exciting virtual world.

Western Luxury: Agitation in China

        The picture above acts as the hottest news on Chinese version’s twitter in these days. The girl, Zhou Rui, is a famous magazine model in recent years and she twitted this picture to show how she enjoyed her birthday. However, the picture was deleted quickly by Zhou Rui. Even if she had made prompt action, the netizens had discovered that the man beside her was wearing a Hermes belt.
        Although the whole economic situation among European countries is unsatisfied and worrying, the luxury brands have found their new supporters nowadays. According to the survey conducted by TNS, we can see mainly three things in the graph below. Firstly, Chinese Mainland market ranks No.1 in all areas of the luxury business. Secondly,Chinese Mainland market is six times or eight times higher than other markets. Other markets such as European market and North American market are totally overshadowed by Chinese market. Thirdly, Chinese Mainland market is only part of the whole Chinese market. When it pluses Hong Kong, Macau, and Taiwan markets, it is indeed an incredible market with huge growing potential.

(Source: luxury brands in China)

(Source: luxury brands in China)

        

        From the graph above, we can know that the top reason why Chinese people buy luxury brand goods---they trust in high quality. Moreover, the Asian people tend to appreciate more about western culture as well as western fashion. With Chinese economic developing, more and more mainland people have a crush on the luxury brands. It is good news for every luxury company to develop their business in Chinese Mainland. Up to now, the speed of launching new stores in big cities, such as Beijing, Shanghai, Hong Kong as well as small second or third tier cities is unbelievable. However, luxury business is not fully developed in mainland. Chinese consumers’ attention greatly paid to watches, cosmetics, and handbags. Other areas, for instance, furniture, cell phones, wines, are falling behind.

（Source: China luxury market study 2010）

        Due to Chinese citizens’ incredible purchasing capacity, things changed gradually. More and more Asian models are hired in European fashion week. Significant numbers of Chinese stars are invited to the fashion shows. At the same time, Chinese citizens’ attentions are deeply drawn by the European fashion trend.

(Asian Model wears Givenchy in Paris Fashion Week) 

(Chinese super star Fan bingbing attended in Festival De Cannes) 

        In conclusion, the great purchasing capacity of Chinese market should not be ignored. The western luxury products are no longer unfamiliar to Chinese people. There are grounds for people to believe that the intermingling of western luxury products and eastern culture will make a difference.