Moody’s Investor Services said China’s local-government financing vehicles face greater risk of default, as regulators warn 20 percent of their loans are risky.

Moody’s Sees Defaults as PBOC Warns on Local Risks

Moody’s Investor Services said China’s local-government financing vehicles face greater risk of default, as regulators warn 20 percent of their loans are risky.

A rally in LGFV bonds may reverse, particularly should delinqencies emerge, Christine Kuo, a Moody’s analyst, wrote in an e-mailed response to questions on March 8. The average yield may rise to 7 percent by June from 6 percent now, according to Shenyin & Wanguo Securities Co., the first brokerage incorporated in China and ranked the nation’s most influential research provider by New Fortune magazine in 2010.

“I see increased risk of LGFV defaults because the financial profiles of many remain weak and heavy refinancing is needed,” Hong Kong-based Kuo said. “Regulators have asked banks to control their LGFV exposures. Some of the projects could default unless other sources of funds are found.”

People’s Bank of China Governor Zhou Xiaochuan said in a March 13 press briefing that about one-fifth of loans to the financing arms of local governments are risky. Net debt issuance by these entities surged 179 percent in 2012 to 1.132 trillion yuan ($182 billion), accounting for 50 percent of corporate bond sales, according to Bank of America Corp. data. Read more of this post

Where ‘Channel-Stuffed’ German Cars Go To Die

Where ‘Channel-Stuffed’ German Cars Go To Die

Tyler Durden on 03/17/2013 21:57 -0400

With the collapse of Europe’s auto market, and the channel-stuffing that is rife in every car manufacturer in the world, it is no surprise that at the end of their brief lease periods, European cars (Audi in this case) are being led to this ‘graveyard’ in Germany (70 miles north of Munich). This car park of chaos is full of nearly-new cars meant for destruction so as never to enter the car market as a cheap alternative and to maintain a high-priced spare parts market. It seems the Keynesian profligacy or digging a hole to fill it in has progressed in the 21st century to building a car and crushing that car as the engine of growth for our economies. The site can be found here…

Burmese startups have both foreign competitors and local cronies to contend with

Burmese startups have both foreign competitors and local cronies to contend with

By Sam Petulla — 7 hours ago

Doesn’t matter what it sells—just call it Facebook.Sam Petulla

YANGON— To hear him talk, Thiha Aye Kyaw sounds pretty much like an ambitious young entrepreneur anywhere on the planet. The 20-year-old computer science student has already built an app that makes him about as much money as a full-time software engineer. Businesses seek him out, and he no plans to join a large IT company after he graduates. He and his friends “don’t want to get the salary and work under other people.”

Except that Thiha lives in Myanmar, which makes realizing his entrepreneurial dreams a little more complicated.

With Google’s chairman, Eric Schmidt, visiting Myanmar this week, there’s a lot of attention on the country’s untapped potential for investment, especially in technology and communications. Myanmar is implementing a new foreign investment law and plans to dramatically increase internet and mobile connectivity from its current levels of less than 10%. In January it hosted Barcamp Yangon, the country’s largest tech conference, attended by an estimated 6,000 people, where Thiha rubbed shoulders with entrepreneurs and digital activists from all over the planet; there were also a few of Schmidt’s colleagues from Google.

But Burmese startups have to contend both with foreign companies that are much better financed and more experienced, and with powerful local businessmen with ties to the regime. Read more of this post

There are fresh allegations that some of the money that went missing from a Chinese company once listed on the Nasdaq may have been laundered through slot machines in Las Vegas casinos

More on the Chinese missing millions that may have been laundered through Las Vegas

By Naomi Rovnick — 2 hours ago

There are fresh allegations that some of the money that went missing from a Chinese company once listed on the Nasdaq may have been laundered through slot machines in Las Vegas casinos.

As we reported in December, medical equipment maker China Medical Technologies was listed on the Nasdaq from 2005 until February last year, and had the bluest of blue-chip advisers, underwriters, investors and creditors. It was wound up last July after missing interest payments. According to court filings since our last report, the company’s liquidators now claim that $670 million of cash the company raised in its 2005 IPO and subsequent equity and bond sales cannot be located, upping their estimate from a previous $400 million. Read more of this post

‘Wash Trades’ Scrutinized; U.S. regulators are investigating whether high-frequency traders are routinely distorting stock and futures markets by illegally acting as buyer and seller in the same transactions

Updated March 17, 2013, 9:42 p.m. ET

‘Wash Trades’ Scrutinized

Issue Is Whether High-Speed Firms Illegally Buy, Sell Futures in Same Deals

By SCOTT PATTERSON, JENNY STRASBURG and JAMILA TRINDLE

U.S. regulators are investigating whether high-frequency traders are routinely distorting stock and futures markets by illegally acting as buyer and seller in the same transactions, according to people familiar with the probes.

Such transactions, known as wash trades, are banned by U.S. law because they can feed false information into the market and be used to manipulate prices. Intentionally taking both sides of a trade can minimize financial risk for the trading firm while potentially creating a false impression of higher volume in the market.

The Commodity Futures Trading Commission is focused on suspected wash trades by high-speed firms in futures contracts tied to the value of crude oil, precious metals, agricultural commodities and the Standard & Poor’s 500-stock index, among other underlying instruments, the people said.

The agency is looking at potential wash trades by multiple high-speed firms, although it isn’t known which ones investigators are scrutinizing. Firms found guilty of intentionally distorting the market through wash trades could face hefty fines. Read more of this post

Philippines Bets Big on Casinos; Manila Wants to Be as Big as Vegas

Updated March 17, 2013, 6:27 p.m. ET

Philippines Bets Big on Casinos

New $1.2 Billion Solaire Resort Opens, Raising Asian Pressure on U.S. Gambling Industry

By KATE O’KEEFFE

MANILA—The Philippines this weekend launched its bid to become Asia’s third gambling hub with the opening of a $1.2 billion casino, as the region battles the U.S. for supremacy in the global gambling market.

In China, Macau’s $38 billion gambling industry already generates six times the revenue of the Las Vegas Strip. In Southeast Asia, Singapore’s gambling revenue matched that of the U.S. casino capital within a year of the island opening its first resorts in 2010. Now Manila is gunning for Vegas, too. Read more of this post

Thailand: The government’s rice pledging scheme appears to have created a new worry for consumers. Many people now wonder if is it safe to eat rice that has been kept in warehouses for years; Doctor warns against eating mouldy grains

How safe is our rice?

Doctor warns against eating mouldy grains

• Published: 18 Mar 2013 at 00.00

The government’s rice pledging scheme appears to have created a new worry for consumers.

Besides concerns over whether the government can manage its huge rice stockpile to prevent any severe impact on the country’s budget, many people now wonder if is it safe to eat rice that has been kept in warehouses for years.

Their worries will likely increase after Dr Banchob Junhasavasdikul questioned the quality of rice and whether it had become rotten and mouldy.

In an interview with Isranews, the founder of the Balavi Natural Medicine Center said he believes many consumers are eating fungal or mouldy rice that can be poisonous and increase the risk of cancer.

The pledging scheme has reduced the competitiveness of Thai rice exports, so the government is selling the grain locally at cheap prices, he said. Read more of this post

Pension and Investment Research Consultants, global independent research provider, disclosed that the British sizable banks have undisclosed losses of up to 31.8 bn pounds; HSBC tops list with 10.4 bn pounds in undisclosed losses

(5) HSBC:
Pension and Investment Research Consultants, global independent research provider, disclosed that the British sizable banks have undisclosed losses of up to 31.8 bn pounds. In particular, HSBC HOLDINGS (00005.HK) accounted for 10.4 bn pounds, topping the list
(5 HK) @ HK$130.9: market cap. US$200,315.1m, daily liquidity US$526.8m. Broker forecasts: 12 buys, 13 holds, 8 sells, 95.8x current year P/E, 0.7% yield.

British banks may have £30bn hidden losses

British banks may be harbouring a black hole of as much as £50bn in undeclared losses that do not show up in their accounts but hamper their efforts to lend, a shareholder group has warned.

By Louise Armitstead, Chief Business Correspondent

6:20AM GMT 12 Mar 2013

PIRC has calculated the amount of bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

HSBC, which is the biggest bank by assets, was shown to have £10.4bn of hidden losses, the Royal Bank of Scotland has £9.4bn, and Barclays has £7.3bn. Lloyds Banking Group has £2.5bn and Standard Chartered £2.2bn. Together the undeclared losses total £31.8bn.

The research shows the distorting impact the accounting rules, which allow bad loans to remain hidden, have on bank results. PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts. Read more of this post

Could The “Cyprus Fiasco” Occur In The United States? The bottom line is that the Rubicon has been crossed and deposits have now been forcefully confiscated

Could The “Cyprus Fiasco” Occur In The United States?

Tyler Durden on 03/17/2013 12:37 -0400

As has been assiduously explained by members of the European statist oligarchy, the reason for the deposit tax levy, in addition to the broader unsecured debt “bail-in” bailout of Cyprus, was due to the unique funding structure of Cypriot banks, in which the bulk of funding was in the form of deposits (whether Russian or domestic), leaving a tiny €2 billion in the form of junior bonds. Since the bailout would require realigning the balance sheet to a new, sustainable “fresh start” in which assets were remarked to a realistic value, it would mean impairing liabilities all the way down the capital structure. Naturally, politics played a big part in the decision to impair what Germany primarily saw as a Russian money-laundering haven, while local depositors were merely “collateral damage.”

Politics aside, the bottom line is that the Rubicon has been crossed, and deposits have now been forcefully confiscated in what Europe promises to be a standalone case. What is certain, is that nobody will wait to find out how long it takes before Europe’s class of increasingly more desperate and ill-meaning despots is found to be have lied once more (as it has about everything else since the start of the European crisis). And while the mainstream media will be focused primarily on Europe in the coming days, as BCG and we have warned, the topic of “wealth taxation” is now front and center, and it stars not only Europe, but the US as well. Read more of this post

Europe Braces for Renewed Turmoil as Cyprus Deposit Levy at Risk; “Cyprus will turn into Libya”; The levy is “a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future”

Europe Braces for Renewed Turmoil as Cyprus Deposit Levy at Risk

Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation’s bailout and spark a new round in the debt crisis.

Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.6 billion) by taking a piece of every bank account in Cyprus, delayed a parliamentary vote to pass the measure by a day. The European Central Bank pushed for a vote today, according to two people with knowledge of the discussions. Anastasiades plans to address the nation later today.

The levy is “a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future,” Joachim Fels, chief economist at Morgan Stanley in London, wrote in a note to clients.

Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member bloc since the ECB’s pledge in September to backstop troubled nations’ debt. With no government in Italy, Spain in the throes of a political scandal and Greece struggling to meet the terms of its own bailout, more turmoil could hamper efforts to end the crisis.

Anticipating gains in haven markets, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said on Twitter that the concern in Cyprus “moves risk-on trade to backseat.”

“Sell euro as well,” he wrote. Read more of this post