Latest China bailout reveals risk of local government’s hidden debts; A Chinese local government has apparently used public funds to repay the debt of a private firm

Latest China bailout reveals risk of local government’s hidden debts

Tue, May 7 2013

By Gabriel Wildau

SHANGHAI (Reuters) – A Chinese local government has apparently used public funds to repay the debt of a private firm, in a case that raises fresh questions about whether recent estimates of local government debt properly account for the full range of local liabilities. It is not the first time local officials have bailed out a private enterprise, but the fact that the municipal government had formally guaranteed the debt highlights the lack of visibility on the extent of localities’ hidden commitments. Read more of this post

Bankers Warn Fed of Farm, Student Loan Bubbles Echoing Subprime

Bankers Warn Fed of Farm, Student Loan Bubbles Echoing Subprime

A group of bankers that advises the Federal Reserve’s Board of Governors has warned that farmland prices are inflating “a bubble” and growth in student-loan debt has “parallels to the housing crisis.” The concerns of the Federal Advisory Council, made up of 12 bankers who meet quarterly to advise the Fed, are outlined in meeting minutes obtained by Bloomberg through a Freedom of Information Act request. Their alarm adds to a debate on the Federal Open Market Committee about whether the benefits from their monthly purchases of $85 billion in bonds outweigh the risk of financial instability. While Chairman Ben S. Bernanke has argued the program is worth pursuing, Fed Governor Jeremy Stein and Kansas City Fed President Esther George are among those who have voiced concerns that an extended period of low interest rates is heightening the risk of asset bubbles. “Agricultural land prices are veering further from what makes sense,” according to minutes of the council’s Feb. 8 gathering. “Members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates.” Read more of this post

Brazilian pension funds go global

May 7, 2013 7:11 pm

Brazilian pension funds go global

By Joseph Leahy in São Paulo

As little as a year ago, Brazil’s greatest concern was the currency war – a tsunami of international funds that it believed was threatening to inundate its financial markets and those of other emerging countries.

Now, Brazilian real interest rates have fallen so low that, in a dramatic reversal, the country’s own pension funds are looking abroad. While their initial offshore investments will not amount to anything like a tsunami, it marks the start of what may prove to be an important step in the maturing of Brazil’s financial industry. Read more of this post

Korean firms far behind in creativity

2013-05-07 16:25

Korean firms far behind in creativity

By Kim Rahn

The government is aiming to achieve a “creative economy” by adopting more creative and innovative ideas in all industries. In reality, however, employees think Korea’s working culture is far from creative. If the corporate cultures of global firms famous for creativity, such as Google or Facebook are graded at 100, the average score for Korean companies would be 59.2, mainly due to hierarchism, a survey showed Tuesday. The survey was conducted recently on 500 workers by the Korea Chamber of Commerce and Industry (KCCI). According to the study, the smaller the size of a company, the lower a score it obtained. Asked the reasons for such low grades, 61.8 percent of those surveyed cited the country’s hierarchical culture or rigid communication system in which juniors always have to obey superiors. When multiple responses were given, 45.3 percent said the corporate culture puts more value on the organization than on individuals. “Seniors give orders and juniors follow. That’s all. Some seniors even think that juniors who make suggestions about work are impertinent,” said a steel company worker who asked not to be named. Read more of this post

The liquidity crisis at the STX Group, Korea’s 13th largest conglomerate, is weighing heavily on creditor banks amid dismal earnings outlook for the banking sector

2013-05-07 18:12

STX crisis may spill into banking sector

Credit extended to cash-strapped group reaches W13 tril.

By Na Jeong-ju

The liquidity crisis at the STX Group, the country’s 13th largest conglomerate, is weighing heavily on creditor banks amid dismal earnings outlook for the banking sector.

Creditors of STX may suffer losses totaling 13.2 trillion won ($12.1 billion) if the group collapses, according to the Financial Supervisory Service (FSS). Read more of this post

China Export Gains Spur Renewed Skepticism of Figures

China Export Gains Spur Renewed Skepticism of Figures: Economy

By Bloomberg News – May 8, 2013

China’s export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell, spurring Bank of America Corp. and Mizuho Securities Co. analysts to say the figures were inflated by fake reports. The 14.7 percent increase, reported by the General Administration of Customs in Beijing today, was led by a 57.2 percent jump in shipments to Hong Kong that highlighted suspicions of false transactions used to mask capital flows into China. A customs spokesman said last month that the agency would investigate the “extraordinary” gain in trade with Hong Kong. The report deepens skepticism on the reliability of trade data from the world’s largest exporting nation, with Royal Bank of Scotland Group Plc saying export gains may be overstated by 9 percentage points. Regulators announced a crackdown this week on companies using trade reports to disguise speculative money inflows chasing a yuan that’s already exceeded last year’s gains against the dollar. “Exports actually haven’t done all that well,” Louis Kuijs, the RBS chief China economist who previously worked for the World Bank, said on Bloomberg Television from Hong Kong. That reflects a “pretty weak global picture, weak demand for Chinese exports” and the impact from yuan appreciation on China’s shipments, he said. Today’s report showed a 0.1 percent drop in U.S. shipments and 6.4 percent decline in exports to the European Union. Previous figures showed China’s shipments to Hong Kong rose 92.9 percent in March, while Hong Kong said imports from China rose 13.8 percent.  Read more of this post

What keeps Israeli companies out of China? A survey by Globes Research and PwC Israel reveals the opportunities, and the difficulties in exploiting them.

What keeps Israeli companies out of China?

A survey by Globes Research and PwC Israel reveals the opportunities, and the difficulties in exploiting them.

6 May 13 18:06, Avi Temkin

“There is a real fear that Israeli companies will not be astute enough to exploit the huge opportunities that have been created by China’s economic growth, especially in the light of the government’s twelfth five-year plan, because of lack of knowledge or fear of failure. The companies need to understand however that those are the markets where the big growth will happen, and if the management doesn’t understand this, then the board of directors should take action,” says Gerry Seligman, an international tax partner in the New York office of PwC US residing in the Tel Aviv office of PwC Israel, following the publication of a broad survey of business models of Israeli companies in China. The survey, by Globes Research and PwC Israel, is based on dozens of interviews with company managers, government officials, and researchers.

Israel Export Institute director Ofer Sachs explains that exports to China are concentrated in three main sectors: electronic components; minerals; and chemicals. These account for 71% of total Israeli exports to China. In other industries, it seems that Israeli companies are finding it hard to expand exports to China, and in some cases they are actually declining. Read more of this post

China’s struggling automakers jump on SUV boom

China’s struggling automakers jump on SUV boom

2013-05-08 01:44:44 GMT2013-05-08 09:44:44(Beijing Time)  SINA.com

BYD is known for electric cars but this year’s flagship model is the S7, a gasoline-powered SUV. It comes with an interior air purifier, radar to help with backing and digital TV. An onboard hard drive can hold 1,000 films. This is China’s Year of the SUV. Whatever their specialties used to be, automakers ranging from global brands to China’s ambitious rookies are scrambling to cash in on the explosive popularity of sport utility vehicles. “We are selling vehicles that have extensive technologies,” said Isbrand Ho, BYD’s director of export sales. “These are all on … premium models for European marques but we are making it available to the everyday person.” Read more of this post

JOLTS Jolts Jobs Report Cheerleaders, Implies Worst Job Growth Since September 2010

JOLTS Jolts Jobs Report Cheerleaders, Implies Worst Job Growth Since September 2010

Tyler Durden on 05/07/2013 12:49 -0400

In the aftermath of last week’s decidedly weak unemployment report (pre-spun to appear strong while ignoring the major drop in average weekly hours worked, which would have resulted in a massive drop in payrolls had total demand for labor stayed constant from March), many were looking for some confirmation, or denial, from today’s Job Openings and Labor Turnover (JOLTS) survey which provides the labor breakdown by new job openings, hires, separations, quits and layoffs for the preceding month. On the surface, the March JOLTS survey was a disappointment – analysts look at the report to see how the Job Openings trend is doing as an indication of labor demand (a decline from 3.899MM to 3.844MM, and down from a year ago, or 3.848MM, as well). More importantly, New Hired tumbled to the lowest since December, printing at 4.259MM, down from 4.451MM in February, and down from 4.435MM a year earlier.  On the exit side, workers indicates less leverage as well, with voluntary Quits, or worker-initiated departures, down 126K from 2.286MM to 2.160MM, while involuntary discharges, or terminations, spiked by 121K from 1.572MM to 1.693MM. As Stone McCarthy explains, this “hints at a less favorable environment for the labor market, especially when the increase in the number of layoffs (+121,000) is taken into consideration.” However, the biggest surprise from the JOLTS report is not in any of the standalone series, but in the time progression of the Net Turnovers number, which is simply the total new hires less total separations. Historically, the Net Turnover number tracks the total monthly nonfarm payroll change (establishment survey) on a almost tick for tick basis. Not this time. In fact as the chart below showed, the upward revised March NFP number to 138K, which preceded the even more optimistic, and much cheered April print of 165K, which sent the S&P and the DJIA soaring to new all time highs on Friday, not only did not get a confirmation, but in fact the JOLTS survey for Net Turnovers  – which came at only 46K in March compared to a revised 138K jobs added per the establishment survey – implied that the real NFP number in March should have tumbled to a level last seen in September of 2010! Looking at only the difference between the monthly NFP change and the implied JOLTS monthly job change, we find only the third highest discrepancy since the Great financial crisis, as can be expected implying a far greater bullish upside bias reported by the BLS in the non-farm payroll data. In fact, on a three monthly moving average, the “bullish bias” difference to NFP reported data is now only as big as it was just after the Lehman failure!  Of course, this data only looks back through March. It is quite possible that the April JOLTS data will be so strong, that it overwhelms the time series on both a monthly, and a moving average basis, promptly catches up to where it should be… Somewhere 150K higher than what the April payroll print of +165K suggested. Somehow, we doubt it.

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Australia: Rising debt weighs heavily on any future boom

Rising debt weighs heavily on any future boom

May 8, 2013

Clancy Yeates

When confidence is building in the property market, as it has been lately, it can be easy to get swept up in the hype. Many of us know people who have made small fortunes on property. After all, house prices rose 6 per cent each year in the boom years between 1995 and 2005. Might this happen again?

Household indebtedness

There are entire industries – from real estate agents to mortgage brokers – that like to believe so. Some of the less scrupulous operators even like to mention this boom era in their sales pitch, implying it may soon return. While there are signs the housing market could be strengthening at the moment – prices are up 2.7 per cent nationally in the past year – a long-term view suggests we won’t see a return to the boom days of old. Why not? Perhaps the biggest reason is household debt. There were several reasons prices rose so quickly in the past, but the big one was that people bid them up by borrowing more. As this week’s graph shows, we went from borrowing about 50 per cent of disposable income in the early 1990s to 150 per cent – where it has settled. This increase occurred because we were taking out bigger home loans. Such a staggering rise was only possible because debt became a lot cheaper, thanks to a one-off drop in interest rates, and competition in banking.

But both these factors are highly unlikely to be repeated, and here’s why.

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Indian economy: An unfinished project; New Delhi has introduced reforms to revitalise business. But many disillusioned investors are not convinced

May 7, 2013 6:58 pm

Indian economy: An unfinished project

By James Crabtree and Victor Mallet

New Delhi has introduced reforms to revitalise business. But many disillusioned investors are not convinced

At a private meeting in Mumbai’s seafront Taj Mahal hotel last month, finance minister Palaniappan Chid­ambaram made corporate India an unusual offer. Sitting in the hotel’s ballroom were most of the country’s leading industrialists, including billionaires Anil Ambani and Kumar Birla, who were gathered to discuss how to re-energise their nation’s flagging economy. “I’ve come here with one mission: to understand your problems and to fix them,” Mr Chidambaram said, according to one of those present. The finance minister then offered a bouquet of flowers to any participant able to report that none of their big investments was held up by bureaucratic obstacles linked to the government. As the conversation progressed round the table, and one tycoon after another complained of multibillion-dollar projects lying unfinished for the want of some official clearance or other, the flowers went unclaimed. Read more of this post

Malaysian Prime Minister Najib Razak’s election win without the bulk of ethnic Chinese voters is set to pose the biggest test yet

Najib Win Masks Biggest Test After Malaysian Chinese Exodus

Malaysian Prime Minister Najib Razak’s election win without the bulk of ethnic Chinese voters is set to pose the biggest test yet for the pro-Malay affirmative action policies instituted by his father more than three decades ago. The May 5 ballot left Najib’s United Malays Nasional Organisation with 109 parliamentary seats, almost enough to govern without any of its 12 allies in the Barisan Nasional coalition, Election Commission data showed. At the same time, the alliance as a whole took just 47 percent of the popular vote, the lowest since 1969, when Sino-Malay race riots flared. With opposition chief Anwar Ibrahim — ally of the mainly ethnic-Chinese Democratic Action Party that expanded its seats – – planning protests tonight over electoral fraud concerns, Najib, 59, is calling for national reconciliation. To get that, he may need to temper the same preferential-contract and job rules that helped secure his victory among rural Malays.

“UMNO is looking strong, but it’s a false dawn,” said Edmund Terence Gomez, a professor at the University of Malaya in Kuala Lumpur who edited a book on the race-based programs. “They know they need structural changes, and if they don’t do it they will face serious consequences in the next election.” Gomez said the biggest change needed is the removal of policies that restrict certain government contracts to Malays and indigenous groups together known as Bumiputera, or “sons of the soil.” They make up about 60 percent of Malaysia’s 29 million people. Abdul Razak, Najib’s father and Malaysia’s second prime minister, initiated the preferences in the wake of the 1969 riots that killed hundreds. Read more of this post

Bears Keep a Distance From Great White Short; Canada looks like a tempting target for short sellers

Updated May 7, 2013, 6:54 p.m. ET

Bears Keep a Distance From Great White Short

By GREGORY ZUCKERMAN and ALISTAIR MACDONALD

Canada looks like a tempting target for short sellers. The country’s commodity-and-debt-fueled boom has slowed, and consumer debt is at records. There are concerns about a housing bubble after residential-property prices surged nearly 90% over the past decade. And some analysts smell trouble from the economy’s reliance on natural resources, as commodities prices fall and the U.S., long an importer of Canadian crude, produces more of its own oil. Despite all that, some hedge funds and other big investors are agonizing over whether to make big bets against, or sell short, Canadian investments. “I want to [short Canada] very badly,” said Vishaal Bhuyan, who runs Nariman Point, a New York hedge fund that manages more than $20 million. “But their housing bust is more slow-moving than ours was and there are no” perfect ways to bet against the Canadian housing market. The fund has held off on betting against Canadian investments.

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Soros’ billion dollar bet on Aussie rate cut pays off

Billion dollar bet on rate cut pays off

May 8, 2013 – 9:46AM

Mark Hawthorne

It may go down as one of the great currency bets in Australian dollar history – a $US1 billion gamble on a Reserve Bank rate cut that has delivered a $US19 million ($18.65m) profit in 36 hours. The beneficiary, if you believe the rumour mill, is investment legend George Soros. Best of all, it appears the 82-year-old American pulled off the deal three times, all with different foreign exchange brokers in Asia, for a tidy profit of almost $US60 million. Read more of this post

This Is Your S&P; This Is Your S&P Without Tuesdays

This Is Your S&P; This Is Your S&P Without Tuesdays

Tyler Durden on 05/07/2013 12:02 -0400

Since the mid-November lows, the S&P 500 has gained a remarkable 268 points on the back of faith, hope, and Bernanke/Kuroda charity. But perhaps what is more mind-numbing is that this efficient market has given us more than 50% of those gains on Tuesdays. With 17 up-days in a row, Tuesday is the Monday dip-buyers dream. Since 1/18, absent Tuesdays, the S&P 500 has gone nowhere. Maybe Bob Geldof needs to write a new song for the US investor “I do like Tuesdays”, or at least a slightly revised cover version of the Bangles’ “Manic Tuesday”. What would we do without Tuesdays? Tuesday is a massive outperformer… and just to be clear… Tuesday’s gains dwarf the rest of the week’s total gains…