Fitch Lowers Rating on China Local-Currency Debt in one of the most prominent warnings to date over a credit buildup in the world’s second-largest economy

Updated April 9, 2013, 9:26 a.m. ET

Fitch Lowers Rating on China Local-Currency Debt

By AARON BACK

BEIJING—Fitch Ratings Inc. on Tuesday lowered one of its key ratings on China’s government debt, in one of the most prominent warnings to date over a credit buildup in the world’s second-largest economy.

The downgrade applies only to China’s yuan-denominated debt, which is primarily traded domestically—not the foreign-currency debt that it issues in international financial markets, so it is unlikely to have a big impact on global financial markets.

But the move highlights a risk to the Chinese economy that has been flagged recently by analysts and market players: that massive lending by China’s banks, as well as shadowy nonbank institutions, runs the risk of turning bad.

The credit rating agency lowered China’s long-term local currency rating to A+ from AA-, with a stable outlook. It kept China’s foreign-currency rating unchanged at A+, saying it is well supported by China’s massive foreign-exchange reserves, worth $3.387 trillion at the end of 2012.

“Risks over China’s financial stability have grown,” Fitch said in a statement. The stock of bank credit extended to the private sector was worth 135.7% of China’s gross domestic product at the end of 2012, the highest level of any emerging market economy rated by Fitch, it said. Read more of this post

H7N9 rumored to have hit Beijing as warnings censored

H7N9 rumored to have hit Beijing as warnings censored

Staff Reporter, 2013-04-09

The deadly new strain of avian influenza is rumored to have spread to Beijing after a local hospital worker issued a cryptic warning to friends on his microblog account, reports citizen journalism website Boxun. A new subtype of the bird flu, known as H7N9, has so far infected 24 people in eastern China and led to seven deaths, according to official figures. The victims have so far been geographically limited to the east of the country, with all reported cases coming from Shanghai and the provinces of Jiangsu, Zhejiang and Anhui. Internet rumors are circulating which suggest a government cover-up, with many microblog users believing that the virus has already spread to other major cities such as Beijing and Guangzhou, though hospital staff have been forced to remain silent. An alleged Beijing hospital worker recently posted a thinly veiled warning about the presence of the virus in the city on their Sina Weibo microblog account. “I cannot say anything. I can only hint that my friends in Beijing need to be careful. Hope you understand what I mean,” said the post, reportedly uploaded by a stem cell researcher from one of the city’s top hospitals. The warning was quickly deleted along with the microblog account that posted it.

Beijing’s health authorities have released a notice on preventing the spread of the flu, requiring all hospitals and medical centers to complete related training by Wednesday. City hospitals with patients suspected to have contracted the virus must also report directly to central health authorities within two hours. The notice also imposes strict restrictions on live poultry trading at markets and the transportation of birds into the city, including on public trains or buses. Food and health regulators will also increase supervision of the slaughter, processing, transportation and storage of poultry for human consumption.

IShares tests the waters for active ETFs

April 7, 2013 4:13 am

IShares tests the waters for active ETFs

By Jackie Noblett

IShares registered the launch of two active US equity products last Monday, the latest test of the waters for the world’s largest exchange traded fund company.

The US house unveiled plans for the iShares Enhanced US Large Cap ETF and the iShares Enhanced Small Cap ETF.

It is the latest attempt by iShares to register active ETFs. But, like other fund companies to have registered funds, including Legg Mason and Federated, iShares has yet to go live with any of those products.

Analysts believe, however, that a number of active ETFs will come to the market this year. Read more of this post

The Price Is Not Right in China; Alibaba’s Internet shopping price index shows that prices in February were up 11% from a year earlier. Alibaba sells a different range of goods than what’s in the CPI basket, but the difference between its number and the official figure is striking nonetheless.

Updated April 9, 2013, 5:32 a.m. ET

The Price Is Not Right in China

By TOM ORLIK

In China, it’s common for shoppers to haggle on prices. Investors should quibble over the country’s inflation data, too. Official figures show China’s consumer price index easing to 2.1% year-on-year in March from 3.2% in February. That’s not unexpected. In February, food prices were higher because of the Lunar New Year, which in 2012 occurred in January. With the celebrations over, food-price increases slowed.

But Chinese households have long harbored suspicions that the CPI is not capturing all of the price increases they face. Some Internet users joke that government statisticians don’t buy their own groceries so they don’t know how much things cost. Data from Alibaba, China’s biggest online-shopping platform, suggests the skeptics may have a point. Based on online transactions, Alibaba’s Internet shopping price index shows that prices in February were up 11% from a year earlier. Alibaba sells a different range of goods than what’s in the CPI basket, but the difference between its number and the official figure is striking nonetheless.

Property prices in major cities are rising fast too. Data from property agency Soufun shows prices in Guangzhou and Beijing rising at double-digit rates. Residential rent in Shanghai is up 13% from a year ago, according to Centaline, another property agency. That makes sense. China’s economy is awash in cash. Money supply expanded 13.8% year-on-year in 2012, compared with 7.8% growth in gross domestic product. A massive increase in new credit in the first two months of 2013 accelerated money-supply growth to 15.2%. Wages are rising at double digit rates. The markets cheered March’s relatively benign price rise. The Hang Seng China Enterprise Index gained 1.9% Tuesday. But if inflation is higher than CPI suggests, official data is not a good predictor of the need for tighter monetary policy.

North Korea said the Korean peninsula was headed for “thermo-nuclear” war and advised foreigners in South Korea to consider evacuation; Japan puts anti-North Korean missiles in Tokyo

N Korea urges South evacuation, warns of nuclear war

POSTED: 09 Apr 2013 2:28 PM
URL: http://www.channelnewsasia.com/news/asiapacific/n-korea-tells-foreigners/632736.html

North Korea said the Korean peninsula was headed for “thermo-nuclear” war and advised foreigners in South Korea to consider evacuation, in the latest in a series of apocalyptic threats.

SEOUL – North Korea said Tuesday the Korean peninsula was headed for “thermo-nuclear” war and advised foreigners in South Korea to consider evacuation, in the latest in a series of apocalyptic threats.

It followed a similar warning issued last week to foreign embassies in its capital Pyongyang to consider evacuating by April 10, saying it could not ensure the safety of their personnel if a conflict broke out.

“The situation on the Korean Peninsula is inching close to a thermonuclear war,” the North’s Asia-Pacific Peace Committee said in a statement carried by the North’s official Korean Central News Agency.

Saying it did not want to see foreigners in South Korea “fall victim”, the statement requested all foreign institutions, enterprises and tourists “to take measures for shelter and evacuation in advance for their safety”. Read more of this post

China: Hunan’s rice sales plummet amid reports of cadmium-polluted crops

Hunan’s rice sales plummet amid reports of cadmium-polluted crops

Staff Reporter, 2013-04-09

Rice sales in parts of Hunan province in south-central China have plunged and local farmers are giving up planting following reports of rice being tainted by excessive levels of cadmium.

The amount of rice sold in parts of the province is said to have dropped by 60%, resulting in a decline in prices, after domestic media reported at the end of February that 10,000 tonnes of cadmium-tainted rice from Hunan was sold to Guangdong province. Read more of this post

Oishi’s founder Tan Passakornnatee deploys a superhero, social media and sugary bottled teas to build his second beverage empire Ichitan. The only thing in his way? His first beverage empire.

4/03/2013 @ 7:00AM |383 views

Thai Beverage Man Tan Passakornnatee Is On a Mission

By Susan J. Cunningham

As he clowns around for a photo shoot in front of the giant fiberglass animals adorning his restaurant compound off of tony Thonglor Road, Tan Passakornnatee is sporting vivid yellow pants and a polka-dot shirt, his customary style for addressing college students or business groups. When he’s in an even more casual mood, he wears T-shirts with the image of a pig (he was born in the year of the pig). But either way he always dons a captain’s hat–not least when he flies amid tall buildings wearing a caped costume in the commercials for his company’s current promotion. The tubby superhero “Tan Man” is on his way to change the lives of 60 people–one a day for 60 days–who are about to win 1 million baht ($33,000). As consolation prizes, he’s also giving away 1,250 iPhone 5s.

Tan is the 53-year-old founder and chief executive of Ichitan Group, which started making flavored tea drinks less than two years ago. With his chubby face under the captain’s hat, the marketing is working. It’s gaining fast on Thailand’s No. 1 brand, Oishi, which Tan himself founded almost a decade ago. Last year Oishi controlled 34% of the country’s $385 million ready-to-drink tea market, while Ichitan was second at 19%, according to a Euromonitor estimate. And the market grew 38%. Read more of this post

Malaysia poll to test regional democracy; Political upsets could undermine southeast Asia’s success

April 8, 2013 4:37 pm

Malaysia poll to test regional democracy

Political upsets could undermine southeast Asia’s success

By Jeremy Grant in Singapore

With their signature royal blue shirts, the leaders of the governing coalition led by Najib Razak, Malaysia’s prime minister, fired up a crowd of thousands of party loyalists in a stadium in Kuala Lumpur at the weekend.

Launching its election manifesto, Barisan Nasional – Malay for “national front” – pledged a raft of election giveaways including more cash handouts for the poor.

So far, so normal in electoral politics in Malaysia, where taxi drivers have already received vouchers for new tyres. But what was unusual was the rally’s timing.

In past elections Barisan’s main party, the United Malays National Organisation (Umno) has waited until after a date has been set for polling day before unveiling its manifesto, such has been its confidence of repeating the thumping majorities it has enjoyed for decades.

But now the coalition is nervous, and with good reason. Read more of this post

Convincing Chinese Bird Flu Is Unrelated to Dead Pigs; “From SARS to H7N9, the most horrible Chinese virus has never been cured: a regime that doesn’t want to tell the truth. Human flu is much worse than bird flu.”

Convincing Chinese Bird Flu Is Unrelated to Dead Pigs

How does the Chinese Communist Party manage to calm a public convinced that — on matters of public health, at least — officials are probably lying to them?

It’s a critical question as infections and fatalities related to the H7N9 bird flu slowly tick upward, unnerving Chinese disinclined to trust their government. The crisis of confidence has its roots in the fatal consequences of the high- level coverup of SARS in 2003, and, more recently, in the still unexplained dead-pig tide that polluted Shanghai waterways. With this sorry history as a precursor and widely assumed precedent, Chinese seem ready to believe anything that doesn’t come from a government mouthpiece — especially if it contradicts the official story or fills a knowledge gap that the government hasn’t addressed.

Consider this sarcastic tweet to Sina Weibo, China’s most popular Twitter-like microblog, on Monday morning by Wu Yan, a popular Internet commentator and writer. In addition to bird flu and SARS, it invokes China’s crackdowns on corrupt officials and the country’s long-standing problems with contaminated dairy products: “From SARS to H7N9, the most horrible Chinese virus has never been cured: a regime that doesn’t want to tell the truth. The root of bird flu is not an animal but those nasty lies from lunatic officials, including: Dead pigs don’t influence the water quality, and domestic milk powder is the safest. And there is a very small ratio of greedy officials or even none! — Human flu is much worse than bird flu.” Read more of this post

China Failed Mining Deals Top $45 Billion on Hanlong Bungle

China Failed Mining Deals Top $45 Billion on Hanlong Bungle

Sichuan Hanlong Group’s botched $1.2 billion bid for Australia’s Sundance Resources Ltd. (SDL) brings the value of China’s recent failed mining deals to $45 billion, a record that’s prompted stricter Chinese scrutiny of acquisitions.

Chinese companies attempted $107 billion worth of mining takeovers over the past five years, with about $45 billion, or 42 percent by value, of deals ending in failure. Of $562 billion of deals proposed globally in the same period, $180 billion, or 32 percent, didn’t proceed, according to data compiled by Bloomberg.

The collapse yesterday of the bid for Sundance, seeking to develop a $4.7 billion iron ore project in Africa, comes after a string of failed investments by Chinese companies, including the demise of a $19.5 billion investment in Rio Tinto Group in 2009. Regulators under China’s new leadership team of Xi Jinping and Li Keqiang have told state-owned companies that overseas takeovers will face a more stringent approval process. Read more of this post

Soros Sees China Shadow-Banking Risk Matching Subprime

Soros Sees China Shadow-Banking Risk Matching Subprime

Billionaire investor George Soros said China has a “couple of years” to control risks from nontraditional financing whose expansion has parallels with the cause of the global financial crisis. “The rapid growth of shadow banking has some disturbing similarities with the subprime-mortgage market in the U.S. that caused the financial crisis of 2007-2008,” Soros said today in a speech at the Boao Forum for Asia in China. “I’m sure the authorities are aware of the dangers. They have both the skills and the resources to deflate an incipient bubble gradually.” The comments add to concerns that the increase in credit risks triggering turmoil that would cause an economic downturn. Aggregate financing, an indicator started by the central bank in 2011 to provide a broader gauge of funding, more than doubled to a record in January from a year earlier.

“If the American experience is any guide, the authorities have a couple of years to bring shadow banking under control,” said Soros, 82. “It’s of utmost importance that the authorities should succeed. Not only for China, but also, for the world.”

Soros also said that next year will be a turbulent one with the euro at the center of the storm, and the decline in the yen and pound will probably aggravate the recession in Europe. In 1992, Soros and his then-chief strategist Stan Druckenmiller made a $10 billion wager the Bank of England would be forced to devalue the pound, a trade that netted $1 billion.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Scott Lanman in Beijing at slanman@bloomberg.net

China Export-Data Skepticism Deepens From Goldman to Nomura

China Export-Data Skepticism Deepens From Goldman to Nomura

China’s unprecedented run of better- than-forecast export growth has spurred deeper skepticism of the data at banks including Goldman Sachs Group Inc., casting doubt on the strength of the recovery.

Gains in overseas shipments exceeded forecasts by at least 7.5 percentage points in December, January and February, the first time that’s happened in three straight months in the eight years Bloomberg has compiled analyst estimates for the data. March figures are due to be released tomorrow at 10 a.m. at a briefing in Beijing, giving the customs administration an opportunity to address the issue.

Overstated exports would mean China is failing to get the boost from global demand that the data suggest as the new government under Premier Li Keqiang seeks to sustain an economic rebound. Theories include companies inflating the value of shipments to bring money into China, according to Nomura Holdings Inc., and exporting the same goods twice as local governments seek to boost data, Goldman Sachs says.

“The recovery in exports is there, but the magnitude probably is much weaker than the official data has been indicating,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. Read more of this post

Chinese Asked to Change Eating Habits as H7N9 Infections Rise

Chinese Asked to Change Eating Habits as H7N9 Infections Rise

China asked its citizens to avoid contact with live poultry as it tries to stem a deadly outbreak of H7N9 bird flu that’s killed six people and infected 15 others in three eastern provinces and Shanghai.

Consumers should avoid markets where poultry are butchered as authorities increase monitoring for the new influenza strain, Feng Zijian, head of emergency response at the Chinese Center for Disease Control and Prevention, said in Beijing today. A vaccine is being prepared in case the virus starts spreading from human to human, health officials said.

“Consumers should no longer pursue the kind of eating habits where they buy fresh chickens that are butchered on the spot,” Feng told reporters at a briefing held jointly with the World Health Organization. “Stalls and markets in cities where live poultry is being butchered need to be closely monitored as possible venues of infection.” Read more of this post