FITCH: China’s Credit Bubble Is Unprecedented In Modern World History

FITCH: China’s Credit Bubble Is Unprecedented In Modern World History

AMBROSE EVANS-PRITCHARD, THE DAILY TELEGRAPH JUN. 16, 2013, 5:58 PM 7,563 21

China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead. “The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,” said Charlene Chu, the agency’s senior director in Beijing. “There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signaling,” she told The Daily Telegraph. Read more of this post

Chinese industry: Ambitions in excess; Overcapacity fuelled by subsidies threatens the world’s second-biggest economy

Last updated: June 16, 2013 6:29 pm

Chinese industry: Ambitions in excess

By Jamil Anderlini

Overcapacity fuelled by subsidies threatens the world’s second-biggest economy

Shi Zhengrong became known as the “sun king” around the time he was named China’s fifth-richest man in 2006. Barely three years later, Suntech, his New York-listed company, was the world’s largest solar panel-maker, producing enough solar cells each year to power 1m energy-guzzling US homes. To struggling manufacturers in the US and Germany, Suntech was part of anunstoppable juggernaut that undercut markets, flooded the world with ultra-cheap products and put competitors out of business. Indeed, the European Commission isthreatening to raise import tariffs on Chinese producers for allegedly selling solar panels in Europe for less than they cost to make. But China’s business model is far from unassailable. In March, Suntech filed for bankruptcy protection. From a market value of $16bn at its peak, the company is now worth about $180m. The sun king has been dethroned as chairman. In fact, the solar industry is only the most pronounced example of broader overcapacity in China. Its rise and fall has followed a pattern that is becoming familiar across the world’s second-biggest economy. Read more of this post

“When markets turn, the exit door is far narrower than investors understand”; as investors seek to sell down some of their fixed-income holdings, the lack of a Wall Street escape outlet for the debt has suddenly become a problem

June 16, 2013 7:00 pm

Markets on edge as investors seek exit

By Tracy Alloway and Michael Mackenzie in New York

Mom and pop investors who flocked to the great bull run in bonds are now facing a messy exit thanks to striking changes in one of Wall Street’s biggest markets.

The rise of exchange traded funds has given retail investors instant access to a range of debt including high-yield, inflation-indexed and investment grade bonds.

At the same time, big banks which buy and sell bonds on behalf of the funds say they have cut their inventories of corporate debt due to new financial regulations. Read more of this post

The ascent of Gautam Adani is among the most startling in recent Indian business history

THE MONDAY INTERVIEW

June 16, 2013 1:36 pm

Gautam Adani, founder, Adani Group

By James Crabtree

Shipping up: Gautam Adani convinced the government of Gujarat to let him develop a harbour facility near Mundra, India’s largest private port

The ascent of Gautam Adani is among the most startling in recent Indian business history. A self-made billionaire in a nation awash with dynasties, he turned a minor commodities business into a conglomerate stretching from ports and shipping to coal, power and infrastructure. The business grew 16-fold in barely a decade, earning revenues of $8.7bn last year. It is an expansion unmatched by any other Indian first-generation industrialist, and one that now earns Mr Adani a place at the pinnacle ofhis country’s tycoon class. Read more of this post

Hypermarkets suffer midlife crisis; Fifty-year-old concept seeks relevance in modern era

June 16, 2013 11:39 am

Hypermarkets suffer midlife crisis

By Scheherazade Daneshkhu in Paris and Andrea Felsted in London

Miniskirts and the beehive were all the rage, The Beatles topped the charts, push-button telephones were launched – and the firsthypermarket was born.

“The Times They Are a-Changin’,” sang Bob Dylan in 1963, the year that Carrefour’s new “everything under one roof” concept opened the doors to a revolutionary new way of shopping. Read more of this post

Stuttgart’s train station, Hamburg’s concert house and Berlin’s airport: Three projects in Germany are currently competing to be seen as the country’s most disastrous

06/14/2013 04:38 PM

Starchitect Trio

The Men Behind Germany’s Building Debacles

Stuttgart’s train station, Hamburg’s concert house and Berlin’s airport: Three projects in Germany are currently competing to be seen as the country’s most disastrous. SPIEGEL spoke to the star architects behind the construction sites.

Christoph Ingenhoven, Meinhard von Gerkan and Pierre de Meuron are among the best-known architectsin the world. So how is it possible that these grand masters are responsible for construction sites where many things have been going wrong for years? What are the reasons that public building sites in Germany so often turn into scenes of disaster? As different as the three architects’ projects are, their problems are similar: delays to the point of construction freezes and hundreds of millions of euros in cost overruns. The train station and railway project Stuttgart 21 is identified with 53-year-old architect Christoph Ingenhoven, although he is only responsible for the construction of the main train station. The Hamburg architecture firm of Gerkan, Marg and Partners built the Berlin Brandenburg International Airport, under the leadership of 78-year-old Meinhard von Gerkan, who was fired by the airport company in 2012, only to be brought back to the project this year. Finally, the Swiss architecture firm Herzog & de Meuron designed the Elbphilharmonie concert hall in Hamburg, while the construction portion was managed by the construction giant Hochtief, with which Pierre de Meuron, 63, and his partners were long at odds. The fees for all architects and general contractors involved amount to €93.9 million ($125 million) for the Elbphilharmonie and €36 million for the Stuttgart train station. According to Gerkan, an exact amount cannot be determined at this time for Berlin’s long-awaited new airport. The three men recently met at the SPIEGEL building in Hamburg to discuss their controversial projects. Read more of this post

Central Banks Failure to Communicate Boosts Bond Yields

Central Banks Failure to Communicate Boosts Bond Yields

What central banks may have the world over is a failure to communicate.

Officials are struggling to spell out their visions for monetary policy, often amid a chorus of competing views. Chairman Ben S. Bernanke is trying to manage expectations about when the Federal Reserve will slow asset purchases and raise interest rates. Bank of Japan Governor Haruhiko Kuroda’s reflation-push is backfiring by driving up bond yields. European Central Bank President Mario Draghi is dashing investors’ hopes he once kindled for extra stimulus.

The muddied messaging already is roiling financial markets, threatening to undermine the confidence of investors, households and consumers and so undoing efforts by central banks to strengthen their economies. The opacity puts policy makers under pressure to improve the communication techniques they’ve been using to restrain borrowing costs. Read more of this post

Rigged Benchmark Probes Proliferating From Singapore to London

Rigged Benchmark Probes Proliferating From Singapore to London

The probe of Libor manipulation is proving to be the tip of the iceberg as inquiries into assets from derivatives to foreign exchange show that if there’s a chance to rig benchmark rates in world markets, someone is usually willing to try.

Singapore’s monetary authority last week censured 20 banks for attempting to fix interest rate levels in the island state and ordered them to set aside as much as $9.6 billion. Britain’s markets regulator is looking into the $4.7 trillion-a-day currency market after Bloomberg News reported that traders have manipulated key rates for more than a decade, citing five dealers. Read more of this post

Twelve years in bankruptcy, yet investors in love with company. Why?

Published: Monday June 17, 2013 MYT 8:45:00 AM

Twelve years in bankruptcy, yet investors in love with company. Why?

COLUMBIA, Md./NEW YORK: A company stuck in bankruptcy for 12 years may not seem like much of a catch, but investors have fallen in love with U.S. specialty chemical manufacturer W.R. Grace & Co and its surging sales to the energy sector.

One of the longest bankruptcies in U.S. history, Grace filed for Chapter 11 protection in 2001 after an asbestos leak at one of its mines led to thousands of lawsuits against the company.

Through bankruptcy, Grace was able to pause debt repayments, survive two recessions and take advantage of a U.S. shale energy revolution that is fueling demand for its fine-powder catalysts, which help refiners process crude oil into gasoline, heating oil and other products. Read more of this post

Bond market nerves threaten to end Europe’s calm

June 16, 2013 4:32 pm

Bond market nerves threaten to end Europe’s calm

By Wolfgang Münchau

There is quite a bit of bad news still to come out of the eurozone itself

Will the bond market vigilantes come to the eurozone and wreak havoc? Thestrong market reaction to a change in expectations about the monetary policy of the US Federal Reserve suggests that the period of ultra-low market interest rates may be coming to an end sooner or later. The markets recovered at the end of the week hoping that this moment might arrive later. For the eurozone, the implications would neither be immediate, nor direct – but potentially significant.

To see the impact, it is important to understand why bond market conditions have become so propitious since last summer. One reason is that investors firmly believed a pledge from Mario Draghi, president of the European Central Bank, to provide an unlimited backstop to the eurozone’s sovereign debt market. They also attached strong credibility to the notion of a eurozone banking union. This, however, remains work in progress. Read more of this post

Korean pawn shops dealing in smartphones and other IT products are enjoying a boom on growing demand from tech-savvy but cash-strapped young clients in need of short-term loans.

2013-06-16 14:43

IT pawn shops mushrooming

By Nam Hyun-woo
Pawn shops dealing in smartphones and other IT products are enjoying a boom on growing demand from tech-savvy but cash-strapped young clients in need of short-term loans.
For years, people have been pawning items for short-term loans because they could not get loans from mainstream banks or were worried that borrowing money would lower their credit rating.
While traditional pawn shops deal in literally “anything worth money,” such as watches or expensive clothing, IT pawn shops specialize in tech gadgets which have emerged as valuable assets.
On May 22, a new IT pawn shop opened near Kyung Hee University in north eastern Seoul. The store is registered with the Financial Supervisory Service as a legitimate lender.  Read more of this post

Natto Makers to Public Baths Suffer in Abenomics Divide

Natto Makers to Public Baths Suffer in Abenomics Divide

Almost everything Mikio Matsushita’s factory near Tokyo needs to produce natto is imported, from the soybeans used in the fermented Japanese snack to the polystyrene trays in which they’re packaged.

The reliance on imports, combined with the domestic market focus for the quintessentially Japanese product, puts Matsushita on the losing end of government policies that aid heavy exporters by weakening the country’s currency.

Expenses have surged for Matsushita’s company as the yen’s slide boosts its costs for beans grown in China and North America. The fuel it uses to steam the beans and for the natto’s polystyrene packaging, both petroleum products derived from imported crude, have also gotten more expensive. Read more of this post

Japan PM Abe’s true test; rising Govt bond yields

Published: Monday June 17, 2013 MYT 8:47:00 AM

Japan PM Abe’s true test; rising Govt bond yields

TOKYO: Abenomics’ massive monetary stimulus was supposed to depress long-term interest rates to spur economic activity, but the Japanese government bond market has other ideas.

Banks, unable to make money on their Japanese government bonds (JGBs) anymore, have begun sloughing off their holdings, putting upward pressure on yields. Major banks sold off about 11 percent of their holdings in April alone.

Large lenders have hiked their prime rates to make up for the loss of earnings on JGBs, which threatens to price potential borrowers out of the mortgage market, while higher long-term rates could sap corporate Japan’s already anaemic demand for loans. Read more of this post

Indonesia Coal, Oil May Be Depleted in 10 Years

Indonesia Coal, Oil May Be Depleted in 10 Years

By Tito Summa Siahaan on 9:26 pm June 14, 2013.
Indonesia may find itself without the fossil fuels crude oil and coal in the next decade, unless there are major new discoveries, according to an annual report released by British energy giant BP.

The Statistical Review of World Energy 2013, which was released on Thursday, showed that Indonesia may run out of oil by 2024, holding constant the figures for production and proven reserves.

The report showed oil production from the Southeast Asian nation stood at 918,000 barrels per day last year, with remaining reserves at 3.7 billion barrels. Oil consumption was 1.56 million barrels in 2012. Read more of this post

As Australia’s resources investment slows more rapidly than expected, economists say the central bank is running out of time to reignite other parts of the economy

June 16, 2013, 3:45 p.m. ET

Economists See Risk of Australian Recession

By JAMES GLYNN And RACHEL PANNETT

GEELONG, Australia—At Oppy’s Bistro in this industrial heartland, bartender Gael Fedley is thousands of miles—both literally and figuratively—from a resources boom that’s led Australia to grow faster than any major developed economy in recent years.

A string of factory closures in the town, around an hour’s drive from the country’s second-biggest city, Melbourne, is having an impact on a once-thriving business. Fewer customers stop by Oppy’s now, while regulars have less money to spend on booze and little cause to celebrate. Read more of this post

Faltering Economy in China Dims Job Prospects for Graduates; “The only thing that worries them more than an unemployed low-skilled person is an unemployed educated person”

June 16, 2013

Faltering Economy in China Dims Job Prospects for Graduates

By KEITH BRADSHER and SUE-LIN WONG

HONG KONG — A record seven million students will graduate from universities and colleges across China in the coming weeks, but their job prospects appear bleak — the latest sign of a troubled Chinese economy.

Businesses say they are swamped with job applications but have few positions to offer as economic growth has begun to falter. Twitter-like microblogging sites in China are full of laments from graduates with dim prospects.

The Chinese government is worried, saying that the problem could affect social stability, and it has ordered schools, government agencies and state-owned enterprises to hire more graduates at least temporarily to help relieve joblessness. “The only thing that worries them more than an unemployed low-skilled person is an unemployed educated person,” said Shang-Jin Wei, a Columbia Business School economist. Read more of this post

Record Soybean Glut Is Seen Worsening as China’s Appetite Eases

Record Soybean Glut Is Seen Worsening as China’s Appetite Eases

Soybean imports by China, the biggest buyer, may be lower than official U.S. forecasts, deepening a glut and weighing down prices as global reserves are set to reach a record.

Inbound shipments will be 63 million metric tons in the 12 months starting Oct. 1, less than the U.S. Department of Agriculture’s June 13 projection of 69 million tons, according to the median of 14 estimates of China-based crushers and researchers by Bloomberg. Soybeans, which rose to a record $17.89 a bushel in Chicago during the 2012 drought in the U.S., slumped 14 percent this month and are in a bear market along with corn and wheat. Read more of this post

China’s Bearish ETF Bets Most Expensive in Two Months on concern a local money-market cash crunch will deepen a slump in Asia’s biggest economy.

Bearish ETF Bets Most Expensive in Two Months: China Overnight

Options traders are paying the most in two months to protect against drops in the largest Chinese exchange-traded fund in the U.S. on concern a local money-market cash crunch will deepen a slump in Asia’s biggest economy.

The cost of three-month puts on the iShares FTSE China 25 Index Fund (FXI) soared to the highest since September last week, option data compiled by Bloomberg showed. The 4.3-point premium of puts over calls was the widest since April 17. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slumped the most in four months last week, led by a 16 percent drop in Yanzhou Coal Mining Co. Read more of this post