Chinese banks barred from sponsoring IPOs; Securities brokerages at centre of China regulator’s crackdown

May 23, 2013 3:29 pm

Securities brokerages at centre of China regulator’s crackdown; Chinese banks barred from sponsoring IPOs

By Simon Rabinovitch

On the first anniversary of its stock market listing last month, Xi’an Longi Silicon Materials Corp served its factory workers steaming plates of simmered fish, an unusual delicacy for the staff canteen. It was to “ensure that all employees would share in the happy occasion”, the company says.

Just over three weeks later, on May 3, Xi’an Longi received a visit from the stock market regulator. The China Securities Regulatory Commission was launching an investigation, on suspicion that the company had violated the nation’s securities law by failing to disclose a steep fall in profits in the run-up to its listing.

The questions surrounding Xi’an Longi, a producer of silicon wafers and semiconductor ingots, are just one front in a much bigger battle being fought over how China polices its financial industry. At the centre of this battle are the securities brokerages that bring companies to the stock market in initial public offerings. Read more of this post

In Indonesia, soccer is kicked around by political parties; “If you can control football, you are half way to controlling Indonesia”

In Indonesia, soccer is kicked around by political parties

Thu, May 23 2013

By Janeman Latul

JAKARTA (Reuters) – As monsoon rains swept the stadium, the chanting grew louder. “Indonesia! Indonesia!” More than 60,000 people packed into Gelora Bung Karno Stadium in Jakarta on a recent Saturday night to see the national soccer team play. Another 100 million tuned in to television to watch the match, underlining the appeal of soccer in Indonesia where attendance rivals the top English and German soccer leagues. Among the fans are two of Indonesia’s most powerful people – President Susilo Bambang Yudhoyono and politically ambitious businessman Aburizal Bakrie. Their parties have long been battling for control over the sport and its huge audience, hoping this could be a factor in elections next year. Bakrie, who leads the Golkar party and has said he will be a presidential candidate, seems to have wrested control of a unified soccer association that was formed in March after almost two years of the two groups running parallel associations and parallel leagues. The association in charge of the sport controls marketing in the stadiums and on television. “If you can control football, you are half way to controlling Indonesia,” said a senior official at the Indonesian national soccer association, or PSSI. Read more of this post

No trespassing: Instituting better property protections is essential to China’s transitioning economy

No trespassing

Thursday, May 23, 2013

Instituting better property protections is essential to China’s transitioning economy, writes Andrew Sheng and Xiao Geng

Andrew Sheng, President of the Fung Global Institute, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. Xiao Geng is Director of Research at the Fung Global Institute.

Too often, debate about the relationship between the state and the market casts them as opposing forces locked in a zero-sum struggle. But this simplistic approach quickly turns constructive discussion into a casualty of the ideological battle between advocates of both sides. Read more of this post

Party ends for Western Australia’s investment boom

Party ends for Western Australia’s investment boom

English.news.cn   2013-05-24 by Christian Edwards

SYDNEY, May 24 (Xinhua) — It’s over. Official figures released Thursday by the Bureau of Resources and Energy Economics (BREE) show that Australia’s burgeoning resource state of Western Australia is staring down at the now empty barrel of the China- driven investment boom, leaving experts scanning the economic horizon for the next ray of hope. Projects worth over 175 billion Australian dollars, which have already been on the pipeline or under construction, are now slowly being shelved.

New gas projects that have been planned include the 53 billion Australian dollar Gorgon gas project, the 30 billion Australian dollar Browse LNG (liquefied natural gas) project, and the 29 billion Australian dollar Chevron-Wheatstone LNG project, in addition to a range of iron ore, gold and other projects. For more than six months fears have been growing that the party could be over. Read more of this post

Aussie Dollar Is Villain as Ford Ends Mad-Max Land Output

Aussie Dollar Is Villain as Ford Ends Mad-Max Land Output

Ford Motor Co. (F) Falcons, driven by Mel Gibson in Australia’s 1979 movie “Mad Max,” have rolled off a Melbourne production line for 53 years. Now, like Max’s “last of the V-8s,” their days are numbered. Ford, in Australia since 1925, said yesterday it will close its local manufacturing plants in October 2016, resulting in 1,200 job losses. General Motors Co. (GM)’s Holden unit, which traces its roots to 1856 when it started as a saddler business, said on April 8 it will cut about 500 workers as currency devaluations overseas make its operations among the world’s costliest.

The villain has been Australia’s dollar: Up 76 percent versus the yen since October 2008, it has helped send Japanese car imports to a record and sales of domestically made vehicles down 18 percent in four years. Ford’s local President Bob Graziano yesterday said that costs are double those in Europe and four times those of its Asian divisions, and that even twice as much government aid couldn’t make the unit sustainable. Read more of this post

The U.S. and China have struck an agreement giving U.S. accounting regulators access to documents from Chinese accounting firms.

Updated May 24, 2013, 1:08 a.m. ET

U.S., China Set Pact On Auditor Access

By MICHAEL RAPOPORT

The U.S. and China have struck an agreement giving U.S. accounting regulators access to documents from Chinese accounting firms. The deal, expected to be announced Friday, could help U.S. regulators investigate the auditors of U.S.-listed Chinese companies that might have been involved in accounting fraud. The agreement will allow the U.S. Public Company Accounting Oversight Board to see audit records and other documents held by Chinese audit firms. The China Securities Regulatory Commission and China’s Ministry of Finance will help the PCAOB obtain the documents. More than 100 Chinese companies listed in the U.S. have faced questions about their accounting and disclosure from regulators, auditors and short-sellers, and investors lost billions of dollars when those companies’ shares plunged. Read more of this post

Many investors may not be living in the real world

May 23, 2013 7:39 pm

Many investors may not be living in the real world

By Stephen King

A recovery in the global economy would appear to be hallucinatory, writes Stephen King

No one can be strong when China is weak. That, at least, appeared to be the message from the economic data this week. New data suggest lacklustre growth in China – sparking nervous sell-offs in other countries. A one-day decline of over 7 per cent in the Nikkei stock market index might seem like an overreaction but, last year, China was Japan’s most important export destination, accounting for more than 18 per cent of its goods exports. China now accounts for one-quarter of South Korea’s exports. China is also the third-largest destination for US exports, after Mexico and Canada.

Stock market wobbles cannot be attributed toChina alone. Ben Bernanke, Federal Reserve chairman, revealed that asset purchases associated with quantitative easingmight be tapered earlier than investors expected, providing another reason for stock markets to lurch down. Meanwhile, rising bond yields in Japan have led to a new sense of unease: financial bets are no longer all one way. Read more of this post

Imprisoned Entrepreneurs and Russia’s Economic Slump

Imprisoned Entrepreneurs and Russia’s Economic Slump

President Vladimir Putin’s popularity throughout much of Russia is founded on an implicit social compact: People have given up some freedom in return for economic prosperity.

Now, Putin’s authoritarian ways could be killing the economic growth that has helped keep him in power.

Time and time again, Russia’s leaders have pledged to restructure the country’s economy, making it less dependent on oil and gas. In an interview this week to mark the first anniversary of his move to the prime minister’s job from the presidency, Dmitri Medvedev effectively admitted failure. “We must change the structure of our economy,” he told the popular daily Komsomolskaya Pravda. “In the past 13 to 14 years we just did not have enough time to do it.” Read more of this post

Bundesbank chief says ECB has done a lot to fight crisis, can’t solve it

Bundesbank chief says ECB has done a lot to fight crisis, can’t solve it

Filed 13 hours ago

Germany’s federal reserve Bundesbank President Jens Weidmann stands beside the door of a giant safe as he poses for a photograph at the money museum next to the Bundesbank headquarters during a photo shoot with Reuters in Frankfurt May 17, 2013. REUTERS/Kai Pfaffenbach

By Ingrid Melander

PARIS – Bundesbank chief Jens Weidmann said on Thursday it was not up to the European Central Bank to solve the euro zone crisis, resisting pressure from other ECB policymakers for the bank to widen its range of policy tools. Speaking in Paris, Weidmann declined to comment on U.S. Federal Reserve chairman Ben Bernanke’s remarks that the U.S. central bank may start to trim its bond purchases at one of its next policy meetings. Focusing on the situation in the euro zone he said: “Monetary policy, that is to say the Eurosystem (of euro zone central banks) has already done a lot to curtail the crisis.” “But monetary policy cannot solve the crisis, we are completely united on that in the ECB Governing Council,” Weidmann, a member of the policymaking body, told a conference. Read more of this post

Primary Dealers Saw Fed’s Confusing Strategy Reducing QE Impact

Primary Dealers Saw Fed’s Confusing Strategy Reducing QE Impact

The 21 primary dealers that trade securities directly with the Federal Reserve Bank of New York, said that confusion about the central bank’s intentions for its bond-buying program is reducing the policy’s effectiveness.

The dealers’ views were shared with the New York Fed in a survey of primary dealers that the Federal Open Market Committee reviewed at their April 30-May 1 meeting. A diversity of Fed speakers expressing different views has left the primary dealers unsure of the central bank’s intentions, according to the survey results released today by the New York Fed.

“Some dealers noted that the dispersion of views expressed by FOMC participants as to how the FOMC would make decisions regarding the future pace of asset purchases has decreased clarity around the program,” the survey said. “Of these dealers, several suggested that the differing views on monetary policy may reduce the policy’s effectiveness.” Read more of this post

Bonds Rigged as Stocks Expensive for Scots Manager Doubling Fund

Bonds Rigged as Stocks Expensive for Scots Manager Doubling Fund

From his view of the world in Scotland, Bruce Stout says investors risk getting burned because optimism is too high for stocks and bond yields are too low. The markets might be proving him right.

The MSCI World Index, a gauge of developed stock markets, sank by the most yesterday since April 15, while Japan’s Topix Index lost 6.9 percent. Stout, whose 1.5 billion-pound ($2.3 billion) Murray International Trust (MYI) at Aberdeen Asset Management Plc (ADN) posted triple-digit returns during the past four years, has been selling shares he reckons are now too expensive, while his fixed-income holdings are the lowest in 25 years.

“The higher prices go the more short-term expectations can distort things and then you can lose your money,” Stout said at his office in Edinburgh. “That’s why we’re in a capital preservation mode to try and not lose money.” Read more of this post

Fears grow over EM sovereign bond bubble

May 23, 2013 9:18 am

Fears grow over EM sovereign bond bubble

By Robin Wigglesworth

As far as financial follies go, tulip mania takes some beating. But future economic historians may look back at the time when investors financed a convention centre in Rwanda as the moment that the rush into emerging market bonds became frothy.

Despite a large chunk of Rwanda’s budget coming from overseas aid – some of which was withheld last year after it was accused of backing rebels in neighbouring Democratic Republic of Congo – investors rushed to get a slice of the country’sinaugural $400m bond last month. The proceeds are largely to be used to pay for a new conference centre in Kigali, the central African country’s capital. Read more of this post

Delinquent Student Loans Hit Record, 30% Of 20-24 Year Olds Are Unemployed And Not In School

Delinquent Student Loans Hit Record, 30% Of 20-24 Year Olds Are Unemployed And Not In School

Tyler Durden on 05/23/2013 11:37 -0400

Almost a year ago we shared a calculation according to which “Over $120 Billion In Federal Student Loans In Default“, suggesting that the next credit crisis has already arrived. Since then the topic of the student loan bubble has become a household topic. Sadly, that does not mean it has gotten any better. In fact, according to the latest Education Department data it has gotten as bad as it has ever been. As Bloomberg reports, not only have overdue student loans reached an all-time high but the number of young people aged 20-24 out of school and unemployed is at a record high: not quite astronomic by European standards, but hardly a ringing endorsement of an economy set to transition labor tasks to the next generation, especially with the employment of those 55 and older at all time highs. Read more of this post

As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market… And Will Own All By 2018

As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market… And Will Own All By 2018

Tyler Durden on 05/23/2013 21:37 -0400

As is well-known by everyone, the Fed monetizes the US deficit on a daily basis, thanks to the 45 minutes of POMO love each day when it buys Treasuries from Dealers. Of course, the Fed monetizes bonds from across the entire curve (mostly the longer end), which is why it is somewhat complicated to express the amount of risk transfer the Fed takes on every time the S&P posts an uptick as a result of yet another bond purchase by the hedge fund with the largest fixed income portfolio in the history of the world. However, one simple way of expressing just this risk is through the use of ten year equivalents: Ten-year equivalents are the amount of 10-year notes that must be held by the Fed in order to remove the same amount of interest rate risk from the market as its current holdings. What this methodology allows is to represent the Fed’s holdings of all marketable securities on a linear continuum, and represent the remainder, or those bonds held by the private sector, on the side. So what may come as a surprise to most, is that as of this week’s H.4.1 update, the amount of ten-year equivalents held by the Fed increased to $1.583 trillion from $1.576 trillion in the prior week, which reduces the amount available to the private sector to $3.637 trillion from $3.668 trillion in the prior week. And also, thanks to maturities, and purchase by the Fed from the secondary market, there were $5.219 trillion ten-year equivalents outstanding, down from $5.244 trillion in the prior week.

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The Bronze Swan Arrives: Is The End Of Copper Financing China’s “Lehman Event”?

The Bronze Swan Arrives: Is The End Of Copper Financing China’s “Lehman Event”?

Tyler Durden on 05/23/2013 10:06 -0400

In all the hoopla over Japan’s stock market crash and China’s PMI miss last night, the biggest news of the day was largely ignored: copper, and the fact that copper’s ubiquitous arbitrage and rehypothecation role in China’s economy through the use of Chinese Copper Financing Deals (CCFD) is coming to an end. Copper, as China pundits may know, is the key shadow interest rate arbitrage tool, through the use of financing deals that use commodities with high value-to-density ratios such as gold, copper, nickel, which in turn are used as collateral against which USD-denominated China-domestic Letters of Credit are pleged, in what can often result in a seemingly infinite rehypothecation loop (see explanation below) between related onshore and offshore entities, allowing loop participants to pick up virtually risk-free arbitrage (i.e., profits), which however boosts China’s FX lending and leads to upward pressure on the CNY. Since the end result of this arbitrage hits China’s current account directly, and is the reason for the recent aberrations in Chinese export data that have made a mockery of China’s economic data reporting, China’s State Administration on Foreign Exchange (SAFE) on May 5 finally passed new regulations which will effectively end such financing deals. The impact of this development can not be overstated: according to independent observers, as well as firms like Goldman, this will not only impact the copper market (very adversely) as copper will suddenly go from a positive return/carry asset to a negative carry asset leading to wholesale dumping from bonded warehouses, but will likely take out a substantial chunk of synthetic shadow leverage out of the Chinese market and economy. Naturally, for an economy in which credit creation is of utmost importance, the loss of one such key financing channel will have very unintended consequences at best, and could potentially lead to a significant “credit event” in the world’s fastest growing large economy at worst.

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