Small companies struggling to repay loans in Italy and Spain signal bigger problems on the horizon for the euro zone after the dust has settled on Cyprus’s last-ditch bailout

Small businesses spell big problems for Italy and Spain

2:10am EDT

By Silvia Aloisi and Sarah White

MILAN/MADRID (Reuters) – Small companies struggling to repay loans in Italy and Spain signal bigger problems on the horizon for the euro zone after the dust has settled on Cyprus’s last-ditch bailout this week.

Defaults by small and medium-sized enterprises (SMEs), easily the biggest employers in Spain and Italy, are rising at a worrying clip, spelling trouble for the banks and two countries at the heart of Europe’s debt crisis.

“You can be sure that if these companies’ bad debts rise, you’re going to see more bad loans to families, and credit card bills that won’t be paid,” said Javier Santoma, finance professor at Spain’s IESE business school.

The ability of Italy and Spain, which account for 28 percent of the euro zone economy compared with Cyprus’s 0.2 percent, to pull themselves out of crisis and avoid full-blown bailouts depends on the health of their banks; weak banks conserve capital rather than lend to get the economy moving. Read more of this post

Student loan write-offs hit $3 billion in first two months of year as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recovery

Student loan write-offs hit $3 billion in first two months of year

By Elvina Nawaguna | Reuters – Mon, Mar 25, 2013

By Elvina Nawaguna

WASHINGTON (Reuters) – Banks wrote off $3 billion of student loan debt in the first two months of 2013, up more than 36 percent from the year-ago period, as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recovery, an Equifax study showed. Read more of this post

Emerging Stocks Head for Worst First Quarter Since 2008

Emerging Stocks Head for Worst First Quarter Since 2008

Emerging stocks fell, extending the biggest first-quarter slump since 2008, as China’s banking regulator tightened rules on wealth-management products and the cabinet called for new measures to deregulate interest rates. Read more of this post

Aberdeen, Manulife Seek More Independent Boards: Southeast Asia

Aberdeen, Manulife Seek More Independent Boards: Southeast Asia

Southeast Asia’s companies need to add more independent directors to their boards and boost diversity to attract foreign investors including Aberdeen Asset Management Plc (ADN) and Manulife Asset Management.

One of the biggest obstacles is strengthening the roles of independent directors because many publicly traded companies in the region are family-owned, Stephen Schuster, a financial sector specialist at the Asian Development Bank, said in an interview yesterday from Manila. Other challenges include disclosure and cross-border dispute resolution, he said. Read more of this post

Hong Kong Drops New Law Restricting Access to Directors’ Details

Hong Kong Drops New Law Restricting Access to Directors’ Details

Hong Kong’s government dropped legislation that would restrict public access to the personal details of company directors, following opposition from unions, small businesses and journalists.

The Financial Services and Treasury Bureau removed provisions obscuring company directors’ residential addresses and full identification numbers from an overhaul of the city’s companies ordinance, according to a legislative briefing document sent by e-mail from Shirley Wong, the department’s spokeswoman.

Opponents of the change said it would protect bosses from scrutiny and erode the city’s reputation by making it easier to launder money and cheat on taxes. Trade unions have used the database to track down runaway employers who owed wages, and small businesses use the information to conduct background checks on trading partners. Read more of this post

Zoomlion, China’s second-biggest construction equipment maker, Misses Estimates on Finance Costs, Demand Weakness; The stock has slumped 21 percent since Ming Pao reported on Jan. 8 that it had received an unsigned letter alleging that Zoomlion’s sales are exaggerated

Zoomlion Net Misses Estimates on Finance Costs, Demand Weakness

Zoomlion Heavy Industry Science and Technology Co., China’s second-biggest construction equipment maker, posted profit that missed analyst estimates as government measures to cool the property market damped demand while finance costs and provision for bad debts increased.

Net income in 2012 fell 9.1 percent to 7.33 billion yuan ($1.18 billion) from 8.07 billion yuan in the prior year, according to a filing to the Hong Kong stock exchange today. That compares with the 8.49 billion yuan average of 26 analysts’ estimates compiled by Bloomberg. Sales climbed 3.8 percent to 48 billion yuan.

Zoomlion, based in Changsha, Hunan province, and bigger rival Sany Heavy Industry Co. face a drop in orders as slowing economic growth and government curbs on the property market sap demand. Zoomlion is also seeking to boost investor confidence after its shares slumped following a January report in Hong Kong’s Ming Pao newspaper that the company’s sales may have been exaggerated.

“Economic growth in China remained slackened with low investment in infrastructure,” the company said in today’s statement, “The construction machinery industry was also under severe challenges brought by the sluggish growth of production and sales and the increase in credit risks.”

Shares (1157) of Zoomlion rose 0.9 percent to HK$9.37 at the close in Hong Kong trading, before the earnings were released. The stock has slumped 21 percent since Ming Pao reported on Jan. 8 that it had received an unsigned letter alleging that Zoomlion’s sales are exaggerated. Read more of this post

When Will Deposit Haircuts Take Place In Other European Countries?

When Will Deposit Haircuts Take Place In Other European Countries?

Tyler Durden on 03/28/2013 11:55 -0400

When all is said and done, what happened in Cyprus over the past two weeks, is nothing but the culmination of re-marking the “assets” in the country’s financial system (which as noted previously, were a preponderance of worthless Greek bonds and countless other non-performing loans), long priced at assorted “myth” levels, to a long overdue reality. As a result of delaying resolving the mismatch between non-performing assets and liabilities for years, the resolution was one which saw some €16 billion of the total asset base impaired, which in turn necessitated the impairment of billions of deposits: the primary liability funding the Cypriot financial system. Furthermore, as a result of the “Freudian Slip” by the Eurogroup’s new head earlier this week, we know that Cyprus will be the template for all future bank resolutions, which seek to avoid a democratic popular vote of depositor self-impairment (a vote which is now known will never actually pass) and proceed to restructuring the banking sector a la carte, by liquidating bad banks and impairing liabilities to the point where the balance sheet is once again viable (however briefly).

The bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. Which means that the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? Thanks to Credit Suisse we now know the answer. The chart below shows the liability breakdown for various Eurozone nations, of which the key line item is the Total Deposits, and which in Europe comprises the bulk of bank funding. It becomes obvious why Cyprus had no choice but to crush depositors: they make up a whopping 84% of all liabilities (the highest in Europe and matched only by Greece), so assuming all other liabilities are liquidated, there still would be impairments if the total bad assets (assuming all bank assets are loans which in Europe, unlike the US, is more or less the case) pushed above 16% which in Cyprus they did. So applying some simple balance sheet equality math, one can quickly calculate how much of a “Bad-Debt Impairment” assorted European financial systems can withstand before they too have no choice but to follow in Cyprus’ footsteps and begin crushing depositors, who in bankruptcy court are known by a different, less friendly term: General Unsecured Claims.

Read more of this post

How Multilatinas Are Taking Over the World

How Multilatinas Are Taking Over the World

25 MAR 2013 – JONATHAN KANDELL

HERE’S A TEST OF YOUR GLOBAL BUSINESS IQ. Where would you find each of the following: the world’s largest baker, the leading iron miner and the second most valuable airline by market capitalization?

Answer: Latin America. Mexico’s Grupo Bimbo has built the world’s largest bakery products company through a string of acquisitions, Brazil’s Vale is the biggest producer of iron ore, and Latam Airlines Group, a Chilean-controlled company that combines Chile’s LAN and Brazil’s TAM airlines, is the continent’s dominant carrier, with a stock market value of $11.4 billion, second only to Delta Air Lines.

These companies are far from alone. Latin America’s economic renaissance over the past two decades has fostered the emergence of a new generation of corporate champions with regional, and sometimes global, ambitions. Read more of this post

Layoffs trigger panic among Chinese multinational employees; Last year, many multinational employees became eager to change jobs due to worries of being laid off, which was very rare in the past

Layoffs trigger panic among Chinese multinational employees

SHANGHAI, March 28 (Xinhua) — Chinese employees of multinationals are finding their jobs no longer secure and enviable as a massive round of layoffs has hit such companies. Read more of this post