Former World’s Biggest Solar Panel Maker Suntech Seen Not Getting Bailout From Chinese Government; Wall Street May Lose in $541 Million Suntech Bond Default

Suntech Seen Not Getting Bailout From Chinese Government

China won’t rescue Suntech Power Holdings Co. (STP) from its creditors because the former biggest solar-panel maker needs to retrench along with the rest of the industry, two advisers to government agencies said. Officials in Beijing want to pare excess manufacturing capacity and consolidate the $25 billion global industry that’s led by China, said Li Junfeng, director of the climate-change strategic research division at the government’s National Development and Reform Commission. “The government won’t intervene and shouldn’t,” Li said in an interview. Meng Xiangan, vice chairman of the China Renewable Energy Society, a liaison between the industry and the state, said Suntech should “not rely on government assistance.”

The comments from advisers with knowledge of the Chinese government’s thinking cast doubt on whether Suntech, the largest solar panel manufacturer in 2011, can avoid bankruptcy. The company March 11 said it obtained an agreement from more than 60 percent of bond holders to delay repayment for two months on $541 million of notes due tomorrow. The national government wants to avoid a default, which would be the first for a bond issued by a company based in mainland China. Restructuring the solar industry is one of the first issues confronting Premier Li Keqiang as his administration takes over from Wen Jiabao this month. Read more of this post

Daewoo Shipbuilding to Construct Jackup Rigs to Challenge Keppel

Daewoo Shipbuilding to Construct Jackup Rigs to Challenge Keppel

Daewoo Shipbuilding & Marine Engineering Co. (042660), the world’s second-largest shipbuilder, is bidding to build jackup rigs for the first time in three decades to tap more orders from offshore oil discoveries.

Demand for bigger, more sophisticated rigs that can work under harsher conditions is increasing in the North Sea and other regions, Lee Jae Ha, chief marketing officer at the Seoul- based company, said in an interview. Each unit could be worth as much as $600 million, he said.

Oil discoveries, including in the North Sea, have boosted spending by companies for exploration and production. Daewoo is making a comeback since its last delivery in 1983 into a segment that has been dominated by Keppel Corp. (KEP) and Sembcorp Marine Ltd. (SMM)

“We expect demand for these high-specification heavy-duty rigs to increase this year,” Lee said on March 12. “We have a lot of experience building complex drilling units and that will give us a competitive edge over the Singapore yards.”

Keppel and Sembcorp Marine have a combined 70 percent share of the global market for jackup rigs, which are used in shallow waters with extendable legs that allow them to stand on the ocean floor. Read more of this post

China to Free Currency in 5 Years, Says Hong Kong Exchanges’ Li; central bank Governor Zhou Xiaochuan said yesterday in Beijing that the nation should be on “high alert” over inflation and reiterated gradual reform for the yuan’s convertibility

China to Free Currency in 5 Years, Says Hong Kong Exchanges’ Li

China, the world’s second-largest economy, will open its markets and allow its currency to float within five years, said Charles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd.

“China has to reform its interest-rate system,” Li said yesterday during a panel discussion at the Futures Industry Association conference in Boca Raton, Florida. The value of the Chinese currency is limited by the government and is only allowed to rise or fall within a narrow range. Li said that system can’t last forever.

Yuan forwards advanced for a seventh day on optimism China will embark on further currency reforms. The yuan traded near a 19-year high against the dollar as central bank Governor Zhou Xiaochuan said yesterday in Beijing that the nation should be on “high alert” over inflation and reiterated gradual reform for the yuan’s convertibility. Read more of this post

HSBC Boosts Mortgage Rates for the first time in 18 months as Hong Kong Cools Property Market

HSBC Boosts Mortgage Rates as Hong Kong Cools Property Market

HSBC Holdings Plc (5) increased Hong Kong mortgage rates for the first time in 18 months after the city’s banking regulator tightened risk rules on concern a property bubble may undermine financial stability.

Home loans priced at the best lending rate will rise to a range of 2.85 percent to 3.15 percent, from 2.6 percent to 2.9 percent, starting tomorrow, according to an e-mailed statement from the bank. The increase is the first since September 2011, Yvonne Chuang, a Hong Kong-based spokeswoman for the second- largest mortgage lender in the city, said by telephone.

The Hong Kong Monetary Authority on Feb. 22 told banks to set the risk weighting for new residential mortgages at 15 percent or more, to ensure lenders’ capital cushions are deep enough. Standard Chartered Plc last week said the measure will increase its home loan funding cost by a range of 20 basis points to 25 basis points, indicating banks may need to boost mortgage rates.

Since taking office in July, Hong Kong Chief Executive Leung Chun-ying has added property taxes, favored local permanent residents over foreigners, tightened mortgage rules and increased supply after home prices doubled in the past four years.

HSBC ranked second in the city’s home loan market last month with a 17 percent share, while Standard Chartered was in fourth position with 13 percent, according to Hong Kong-based mReferral Mortgage Brokerage Services. Read more of this post

Stranded Hotel in Australia Emblem of Mining Bust: Commodities

Stranded Hotel in Australia Emblem of Mining Bust: Commodities

A prefabricated six-story hotel, once destined to house BHP Billiton Ltd. (BHP) workers, is sitting in 126 boxes stranded on the Melbourne city docks. The stalled project is a sign of the deepening global slowdown in mining.

The contents were to have been assembled 1,990 miles away at Port Hedland, where BHP planned to use the hotel as temporary housing for its estimated $22 billion harbor expansion to export more iron ore. That was before the world’s biggest mining company scrapped its plan, and the hotel developer went bust.

Global capital spending by mining companies is set to drop by a third next year to $96 billion, from a record $141 billion last year, according to UBS AG estimates. Producers have slowed expansions and delayed projects on expectations that commodities prices have passed their highs, after economic growth began slowing in China, the biggest buyer of metals.

“Clearly the rate of new approvals has almost dried up” for mining projects, Michael Elliott, sector leader for Ernst & Young’s global mining practice, said in an interview from Sydney. “A lot of that has been rethinking what rates of return companies now require from these new investments.” Read more of this post

Banks’ Debt Addiction Said to Face Scrutiny at Basel Group

Banks’ Debt Addiction Said to Face Scrutiny at Basel Group

A planned international limit on bank indebtedness will be on the agenda of every meeting of the Basel Committee on Banking Supervision this year as regulators seek to wean lenders off their addiction to debt, according to three people familiar with the talks.

Regulators are preparing to fight lenders over the details of the so-called leverage ratio as they seek to toughen rules on the minimum amount of capital they must use to back their investments. The Basel group, which brings together supervisors from 27 nations, will meet in the Swiss city tomorrow, according to the people, who asked not to be identified because the meetings are confidential. Read more of this post

Growth comes with side effects for Singapore; Opaque manipulated business brings unwanted attention

March 12, 2013 3:48 pm

Growth comes with side effects for Singapore

By Jeremy Grant

Singapore generally dislikes drawing attention to itself when it comes to financial markets.

Having discreetly built itself up as an Asian financial hub, Singapore has now become one of the world’s largest centres for wealth management and commodities trading. But recently the Lion City has been drawing some unwelcome attention in the foreign exchange markets, where it is ranked fourth-largest in the world by trading volume.

Last month two former UBS traders sued the Swiss-based bank alleging they were wrongfully dismissed when they say the bank fired them for gross misconduct. In two lawsuits filed in Singapore they claim they were fired to cover up any role the bank had in allegedly manipulating the pricing of foreign exchange derivatives.

One, Prashant Mirpuri, was employed as an “emerging market southeast Asia non-deliverable forward trader”, according to court filings. The other, Mukesh Kumar Chhaganlal, was a former co-head of macro-trading, emerging markets Asia.

Behind these opaque job titles lies an equally opaque business done in Singapore: dealing in a type of foreign exchange contract known as a non-deliverable forward. Read more of this post

China’s 80 billion disposable chopsticks a ‘burden’ on forests; A total of “20 million 20-year-old trees” have to be chopped down each year to make way for the annual production

China’s 80 billion disposable chopsticks a ‘burden’ on forests

Monday, 11 March, 2013, 2:43pm

Chris Luo chris.luo@scmp.com

A National People’s Congress member has highlighted the dire situation of China’s deforestation during a parliamentary meeting, saying that the country produces as many as 80 billion pairs of disposable chopsticks each year, state news agency Xinhua reported [1].

Bo Guangxin, chairman of state-owned timber firm Jilin Forest Industry, said at a meeting of the annual parliament session on Friday that the mass production of the wooden tableware is a heavy burden on national forests.

Eighty billion pairs of chopsticks is no small figure.

Laid out, that many chopsticks can cover the ground of Beijing’s Tiananmen Square, one of the world’s largest public squares, more than 360 times – with each chopstick being 1cm-by-0.5cm and 20cm long, Bo said.

A total of “20 million 20-year-old trees” have to be chopped down each year to make way for the annual production, he said. Read more of this post

In Spinoffs, a Chance to Jettison Undesirable Liabilities; spinoffs have a dark side, serving as a convenient dumping ground for unwanted businesses

MARCH 12, 2013, 5:44 PM

In Spinoffs, a Chance to Jettison Undesirable Liabilities

By STEVEN M. DAVIDOFF

A spinoff is a product of Wall Street math that says one plus one can equal three. Yet as shareholders of Time Warner may be about to find out, it can also be all about subtraction, as a company ditches an unwanted business, in this case, magazines.

The business argument for a spinoff is typically that a separation of the assets allows both the former parent and the newly independent company to be better run, freeing management to take bolder steps with the new company. And because Wall Street is a place where magic works, the market will recognize this, giving each of the separated companies a higher price.

There is evidence of this effect. Studies of spinoffs have found that they produce short-term gains, although these gains evaporate over the long term.

Spinoffs, not surprisingly, are big business these days on Wall Street. Last year, there were 85 spinoffs worldwide worth $109 billion, according to Dealogic, down just a bit from 93 spinoffs worth $128 billion in 2011.

But spinoffs have a dark side, as they can serve as a convenient dumping ground. In 1999, General Motors spun off its auto parts maker into Delphi, and the following year, Ford Motor did the same with Visteon. Both automakers larded the subsidiaries with too much debt, high labor costs and sweetheart pricing deals. The result sent both spinoffs into bankruptcy. Ford and G.M. are still dealing with the fallout and litigation. Read more of this post

Bond boom ‘as bad as dotcom bubble’

Bond boom ‘as bad as dotcom bubble’

Sovereign bonds are as overvalued as technology stocks were during the dotcom boom, a fund manager has warned.

By Richard Evans

3:41PM GMT 12 Mar 2013

George Godber of Miton said that when Germany issued bonds paying no return at the height of the eurozone crisis, the investment case was akin to a technology company floating with no prospect of making profits.

“When those bonds were issued I thought: ‘This is Baltimore Technologies as over again’,” he said.

Baltimore was one of the defining stocks of the technology boom. It promised to revolutionise internet security but never made a profit and its shares ended up in the “90pc Club” of those that lost almost all their value.

Mr Godber said even gilts yielding 2pc were hugely overvalued on the measure normally used to value shares.

“A 2pc yield is equivalent to a price to earnings ratio of 50,” he said. Shares typically trade at a p/e ratio of between 10 and 20, and investorsbuying shares at the higher end of the range normally expect earnings growth, which is not available on bonds. Read more of this post