The dollar held sway over global markets with stocks in retreat as investors focused cautiously on the US Federal Reserve’s far-reaching decision on whether to scale back extraordinary support policies for assets.

Asian stocks sank for a second day as the US currency had its best session in more than a week, boosted by its haven appeal and bets that potential Fed moves will provide it with a significant boost.

“The US dollar has rebounded modestly in the Asian trading session overnight with USD/JPY rising back towards the Y100 level,” said Lee Hardman, of Bank of Tokyo-Mitsubishi UFJ.

“After the Fed meeting, US dollar direction will continue to be driven by incoming US economic data with strengthening activity and employment conditions appearing likely into year-end to support the US dollar.”

With just a few trading sessions before the Federal Reserve’s widely anticipated communiqué next Wednesday, in which the US central bank is expected to begin reducing its stimulus programme, investors were taking profits.

The FTSE Asia Pacific index sank 0.7 per cent, its worst day of trading in more than two weeks, while Europe’s markets also opened weaker, both the FTSE Eurofirst 300 down per cent and the FTSE 100 in London slipping 0.2 per cent.

The dollar index, which measures its strength against a basket of rivals, rose 0.2 per cent with the US currency ahead in most of the leading pairs.

It rose 0.2 per cent against the euro to $1.3277, 0.3 per cent against the Australian dollar to US$0.9240 and 0.2 per cent against the yen to Y99.74.

Major indices around the Asia region fell, Hong Kong’s Hang Seng index slipping 0.5 per cent, the Shanghai Composite declining 0.8 per cent and South Korea’s Kospi Composite down 0.5 per cent, although Tokyo’s Nikkei 225 Average edged 0.1 per cent higher.

Australia’s S&P/ASX 200, which finished the last two sessions at fresh five-year highs, was off 0.4 per cent.

Stocks in Jakarta were down 0.2 per cent after Bank Indonesia raised rates for the second time in two weeks and lowered its economic growth forecasts on Thursday.

The cautious mood followed a region-wide relief rally this month that saw Japanese shares pick up more than 7 per cent. Hong Kong’s market remains up more than 5 per cent month-to-date

Overnight, European and US markets also struggled for gains as eurozone industrial production figures disappointed expectations. On Wall Street, the S&P 500 index ended the session 0.3 per cent lower.

“July’s sharp 1.5 per cent fall in industrial production is a clear reminder that, while the eurozone economy has left recession behind, the return to growth is fragile,” said Martin van Vliet of ING.

In the US, weekly initial jobless claims registered the lowest number of new job seekers for seven years. Still, accompanying details of computer upgrades in two states cast doubt over how meaningful the good news was for markets.

“With Syria no longer posing a threat, for now, focus can switch back to the economic data and, more so, next week’s [Fed] FOMC meeting,” said Craig Erlam, of Alpari.

Additional reporting by Patrick McGee in Hong Kong and Vivianne Rodrigues in New York.

Six global hedge funds are set to secure the first-ever approval to raise money from institutions within China for investing overseas, a key reform in the opening of the country’s closely guarded capital account

Shanghai has granted an overall quota of $300m that will be divided equally among six foreign funds – Canyon Partners, Citadel, Man Group, Oaktree, Och-Ziff and Winton Capital – with each permitted to raise up to $50m, according to people familiar with the programme.

Authorities in China’s leading financial city are working closely with the six funds regarding the details of how they will raise and administer the money.

However, final official approval of the quotas has yet to be signed, according to a person close to one of those funds, leaving them unable to confirm publicly that they have gained full entry to China.

The launch of the programme to allow investment in foreign hedge funds – first reported by the Financial Times last year – is a small but significant step in opening China’s capital account and dismantling the barriers separating China from international markets.

The hedge fund programme will create a new conduit for Chinese cash to flow abroad and will also give Chinese institutions access to alternative investment strategies, from short positions to arbitrage, which they have traditionally lacked.

“To get something like this going is a very long project,” said the person close to one of the funds involved. “We are all talking to Shanghai, which is telling us to keep pushing on with planning the onshore vehicles we need to set up, but there has been no official final confirmation [of the quotas].”

The 21st Century Business Herald, a local financial newspaper, reported on Friday that the $50m quotas had been quietly awarded to each of the six funds on a “trial basis”. It said the hedge funds had wanted larger quotas but that the more limited programme was an indication that regulators are committed to proceeding in a prudent manner.

The qualified domestic limited partner programme, or QDLP, is the last of four main cross-border investment schemes that allow either mainlanders to invest outside of China or foreigners to invest on the mainland.

The qualified foreign institutional investor (QFII) and the renminbi qualified foreign institutional investor (RQFII) programmes give quotas for foreign institutions to invest in China’s markets, while the qualified domestic institutional investor (QDII) scheme gives local institutions quotas to invest outside of China in equities and fixed income products.

China has in the past year dramatically expanded the quotas available to foreign investors to bring money into the country under QFII and RQFII, a sign of the government’s willingness to move ahead more forcefully in opening its capital account. The overall QFII quota, the biggest of the lot, was boosted to $150bn two months ago, nearly double the previous $80bn.

Regulators are expected to reveal details of a new free trade zone in Shanghai later this month that could also give investors additional freedom to shift money in and out of the country.

Amid the accelerated push to open China’s capital account, the International Monetary Fund has warned that Beijing should first prepare its domestic financial system by deregulating interest rates and lifting exchange rate controls.

Many sectors in Hong Kong, such as the creative and cultural industries, research centres and laboratories, and the myriad of design and manufacturing companies with their research and development units, churn out IP in one form or another. Grouping these transactions under the banner of IP trading is a more recent invention.

To gain insight into how Hong Kong fares as a thriving business hub or Central Business District (CBD) in Asia, HKTDC Research conducted a survey in 2012 to identify the strengths of Hong Kong’s CBD functions, interviewing more than 500 senior business executives from companies with regional business in 10 Asia-Pacific cities, and covering six sectors which include IP trade.

Hong Kong is an ideal international platform for IP trading, given its legal system and financial resources, robust IP protection, and presence of a pool of IP specialists able to provide comprehensive services to IP related industries. This notion is well validated by the views of 81 respondents to the IP Trade Survey, comprising IP trading and related services users and providers.

From the survey results, companies with IP-related businesses regarded Hong Kong’s geographical location and its strong institutional structure (e.g. finance, legal and IP enforcement) as crucial in putting it ahead of either Singapore or Shanghai as Asia’s CBD.

As shown in the survey results, nearly 70% of respondents gave good ratings for Hong Kong’s staff efficiency and professionalism (i.e. comprising both “very good” and “good” responses). Besides, the general quality and variety of IP trading services were considered well by over half of the responding IP industry players. Additionally, industry consultations revealed that Hong Kong IP specialists are distinguished from other regional counterparts due to their combined strengthens of bilingual proficiency, IP knowledge, good business sense and international exposure.

Given an attractive IP trading environment, Hong Kong outperforms Singapore and Shanghai in trading across all areas of IP categories. More than half of the respondents viewed Hong Kong as the best location for licensing, copyright trading and technology transfer. Hong Kong’s leading position will be sustained in the next five years, yet it will fall slightly, as the respondents perceived that Shanghai will emerge to become more competitive.

To strengthen and maintain Hong Kong’s leading IP trading position, respondents to the IP Trade Survey suggested that Hong Kong should tackle a few areas. In view of the emerging competition from other Asian cities, Hong Kong will gain further by accelerating the expansion of its IP services cluster and integrating the IP industry chain if the suggestions of respondents to the IP Trade Survey were to be adopted.

In his 2013 Policy Address, Hong Kong’s Chief Executive unveiled a plan to study the strategy for promoting Hong Kong as an IP trading hub, through setting up a working group which comprises government representatives, industry stakeholders and experts from different fields.

The Hong Kong government has also announced a new move in the future positioning of Hong Kong’s patent system. By developing a patent system on a par with those of the advanced economies, Hong Kong’s commitment to IP protection would be further ensured.

With Hong Kong firmly established as 'The Hottest Real Estate Market On Earth', with average prices growing by 23.6 per cent, its major rival seems to be Dubai, where house prices rose by 19 per cent last year. The figures come in a recently-published Forbes survey on real estate values.

According to sources in Dubai, the first three months of 2013 also saw a massive rise in home-buying interest among end-user expatriates as well as investors, with some now speculating that this year could see the city topple Hong Kong from the top slot.

In a recently-released report, Asteco, a Middle-Eastern property management specialist, said: "The Dubai residential market has experienced further increases on the back of demand from relocations, as well as new tenants."

The report, focusing on Q1 2013, pegs the quarterly rental growth for Dubai apartments at three per cent and those for villas at four per cent when compared to Q4 2012. The year-on-year growth, however, amounts to a massive 19 and 21 per cent, respectively, for both apartments and villas.

The report also suggests that sales prices rose even faster than rental values, stating: "Sales prices fared even better – with quarterly increases of 12 and five per cent for apartments and villas and an annual growth of 27 and 24 per cent." If borne out, these figures suggest that a Dubai unit bought in Q1 2012 would have risen in value by 25 per cent within the past 12 months.

According to the Deutsche Bank, Dubai real estate prices and rents enjoyed their 16th consecutive monthly increase in March this year, continuing the steady recovery in the sector and highlighting the return of investor confidence. Explaining the continuing upturn, Athmane Benzerroug, a research analyst with the bank, says: "The price recovery that started in late 2011 in prime properties is now spreading to second-tier communities. Despite new supply, investor confidence remains strong, while main master developers are accelerating project launches."

The bank's figures show that property prices in Dubai saw a 6.2 per cent growth in the first three months of 2013. Part of this growth can be attributed to accelerated activity by a number of locally-based master developers, notably Emaar Properties and Nakheel.

Recent data from the Dubai Land Department (DLD) shows the value of property transactions in Dubai rose 63 per cent to Dh44 billion (HK$93 billion) in the first quarter of 2013, compared with the same period last year.

Sultan bin Mijrin, Director-General of DLD, says: "Dubai's real estate market has shown real durability and flexibility when it comes to dealing with the requirements of investors. The past three months have seen a new breed of investors entering the market in order to capitalise on opportunities that have arisen due to the price correction witnessed in the market over the past two years."

According to Knight Frank, the international real estate agency that provided the raw data for the Forbes survey, Dubai's unique location has been a key factor in the rising value of the property. A report by the company says: "Geographically the UAE occupies a strategic setting between East and West and has become a development hub for international business. The market offers a good climate, favourable tax structure and, in the wake of the Arab Spring, is viewed as a safe haven for wealth, making it attractive for investors and second-home owners."

"Dubai is already very cosmopolitan and the largest segments of buyers at present are Indians and Pakistanis, followed by Saudi Arabians and other Gulf Cooperation Council nationals. What's interesting, however, is that developers have started to expand beyond the traditional markets and are now targeting buyers from Africa and Asia."

Aside from Hong Kong and Dubai, Mainland China also made the top ten, coming in eighth position with an average 9.3 per cent increase in property values. The full list is as follows:

1. Hong Kong: (23.6%)
2. Dubai: (19%)
3. Brazil: (13.7%)
4. Turkey: (10.5%)
5. Moscow: (10.2%)
6. Austria: (10.1%)
7. Taiwan: (9.7%)
8. China: (9.3%)
9. India: (8.5%)
10. Colombia: (8.3%)

Secretary for Financial Affairs and the Treasury Ceajar Chan Ka-keung announced today that the government will issue the third iBonds issue totaling not more than HK$10 billion on June 4, 2013.

Like the previous two rounds, each board lot of the inflation linked bonds -- of a three-year maturity -- will have a face value of HK$10,000. The coupon rate for each interest payment will be determined by the year-on-year inflation rate of Hong Kong, with the lower limit of 1 percent return.

Dividends will be paid every six months.