Bond market sell-off causes stress in $2tn ETF industry as ETFs tumble below the value of their underlying assets; “The losses for ETFs were far beyond what the most sophisticated financial risk models could have predicated for worst-case scenarios”

June 21, 2013 12:21 am

Bond market sell-off causes stress in $2tn ETF industry

By Arash Massoudi, Tom Braithwaite and Stephen Foley in New York

A wave of selling caused many exchange traded funds to tumble below the value of their underlying assets as a bond market sell-off caused stress in the $2tn ETFindustry.

ETFs track baskets of underlying assets, such as emerging-market stocks or municipal bonds, but discounts widened sharply on Thursday as dealers struggled to keep up with the sell orders. Read more of this post

Indonesia IPO train derails as investors hit the exits

Indonesia IPO train derails as investors hit the exits

3:12am EDT

By Janeman Latul and Saeed Azhar

JAKARTA/SINGAPORE (Reuters) – The spark that Matahari Department Store’s $1.3 billion deal was meant to provide Indonesia’s IPO market has turned into a dud.

Investors have bailed on Indonesian stock offerings, spooked by a wave of global market volatility and pricey valuations. The retreat from Jakarta by local and foreign funds is threatening other IPOs in the pipeline and hindering the ability of Indonesian tycoons to unlock money from their businesses. Read more of this post

Threats to Financial Markets Lurk in Dark Pools

Threats to Financial Markets Lurk in Dark Pools

Regulators on two continents have noticed that too much trading in stocks takes place out of sight.

Tomorrow, European finance ministers plan to endorse legislation that would force transactions in privately owned venues known as dark pools into an organized trading system. Meanwhile in the U.S., the Financial Industry Regulatory Authority, the brokerage industry’s self-regulator, sent letters last month to 15 firms, seeking information on how they police their dark pools and what they disclose to customers. Read more of this post

Rolls-Royce Targets Manila Rich as Hanoi Beckons

Rolls-Royce Targets Manila Rich as Hanoi Beckons: Southeast Asia

Rolls-Royce Motor Cars Ltd. targets to sell as many as 20 sedans in a year in the Philippines to tap the growing number of wealthy people in Asia’s fastest-growing economy. Read more of this post

Zhu Jun, CEO of online game developer The9, posted on his Twitter-like Weibo account an article that laid out the idea that a financial crisis was at the doorstep; “This scary article woke me up. Get ready for a nightmare.”

China central bank holds line on shadow banking as rates spike

10:45am EDT

By Gabriel Wildau and Jason Subler

SHANGHAI/BEIJING (Reuters) – China’s central bank faced down the country’s cash-hungry banks on Friday, letting interest rates again spike to extraordinary levels as it increases the pressure on the banks to rein in rampant informal lending and speculative trading.

The banks have been using cheap official funds to finance the vast “shadow banking” market, which Beijing worries is siphoning credit from industry and creating asset-price bubbles. Read more of this post

Creeping mistrust stops euro zone banks lending to peers across bloc

Creeping mistrust stops euro zone banks lending to peers across bloc

2:38am EDT

By John O‘Donnell and Sakari Suoninen

BRUSSELS/FRANKFURT (Reuters) – Euro zone banks are refusing to lend to peers in other countries in the common currency bloc, signaling a worrying fall in confidence that appears to have worsened since the Cyprus bailout earlier this year, data analyzed by Reuters showed. Read more of this post

Despite economic boom, jobs elude many Filipinos

Despite economic boom, jobs elude many Filipinos

MANILA — At his vegetable stand on a busy street in the Philippine capital, Mr Lamberto Tagarro is surrounded by gleaming, modern skyscrapers, between which a river of luxury vehicles flows.

BY –

3 HOURS 14 MIN AGO

MANILA — At his vegetable stand on a busy street in the Philippine capital, Mr Lamberto Tagarro is surrounded by gleaming, modern skyscrapers, between which a river of luxury vehicles flows.

“The Philippines is the rising tiger economy of Asia,” he says. “But only the rich people are going up and up. I’m not feeling it.” Read more of this post

Asia dominates world’s most expensive office spaces

Asia dominates world’s most expensive office spaces: report

4:04am EDT

By Ilaina Jonas

NEW YORK (Reuters) – Five of the six most expensive office areas in the world are in Asia, as demand by global companies to locate their outstripped the supply, according to a semiannual report released on Thursday by real estate services company CBRE Inc. Read more of this post

Emerging Markets Crack as $3.9 Trillion Funds Unwind

Emerging Markets Crack as $3.9 Trillion Funds Unwind: Currencies

Investors are pulling money from emerging markets at the fastest pace in two years as slowing economic growth and the prospect of less global stimulus sink stocks, bonds and currencies from India to Brazil.

More than $19 billion left funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to EPFR Global. Foreign investors dumped an unprecedented $5.6 billion of Brazilian stocks and $3.2 billion of Indian bonds this month, exchange data show. JPMorgan Chase & Co.’s emerging-currency index is down 1.4 percent this quarter, while the rupee and Turkish lira hit record lows and the real reached its weakest level since 2009. Read more of this post

Emerging Markets Era of Outperformance Is Ending, Goldman Says

Emerging Markets Era of Outperformance Is Ending, Goldman Says

The decade-long outperformance of developing-nation assets has ended, according to the Goldman Sachs Group Inc. economist who predicted the rise of the biggest emerging markets in 2003.

The five trends that spurred outsized gains during the past 10 years — surging growth in the so-called BRIC nations, higher commodities, improved government finances, slower inflation and lower U.S. bond yields — are halting and in some cases reversing, Dominic Wilson, the chief markets economist at New York-based Goldman Sachs, wrote in a report dated yesterday. Read more of this post

Amartya Sen: Why India Trails China

June 19, 2013

Why India Trails China

By AMARTYA SEN

CAMBRIDGE, Mass. — MODERN India is, in many ways, a success. Its claim to be the world’s largest democracy is not hollow. Its media is vibrant and free; Indians buy more newspapers every day than any other nation. Since independence in 1947, life expectancy at birth has more than doubled, to 66 years from 32, and per-capita income (adjusted for inflation) has grown fivefold. In recent decades, reforms pushed up the country’s once sluggish growth rate to around 8 percent per year, before it fell back a couple of percentage points over the last two years. For years, India’s economic growth rate ranked second among the world’s large economies, after China, which it has consistently trailed by at least one percentage point. Read more of this post

Costly lesson for energy groups in Australia LNG projects

June 19, 2013 5:04 pm

Costly lesson for energy groups in Australia LNG projects

By Neil Hume in Sydney

The most surprising thing about the liquefied natural gas projects under construction on the central coast of Queensland is not their size, complexity or cost.

The UK’s BG Group and Australian groups Origin Energy and Santos are spending A$60bn (US$57bn) on three separate ventures near the port town of Gladstone to convert coal seam gas into LNG for export to high-paying customers in Japan and South Korea. Read more of this post

25 Years Of Real Estate In One Chart

25 Years Of Real Estate In One Chart

Tyler Durden on 06/19/2013 20:38 -0400

With Bernanke now making it extremely clear that housing is all we have, the following may raise a few eyebrows. Submitted by Ramsey Su via Acting Man blog, There is good news. This is likely my shortest rant ever. Freddie Mac recently released the 2013 First Quarter Refinance Report.  My attention was drawn to one chart.  More specifically, the blue line in the chart.

Read more of this post

Which Chinese Banks Have The Biggest Default Risk? Echoes of Mao in China cash crunch

Which Chinese Banks Have The Biggest Default Risk?

Tyler Durden on 06/20/2013 20:43 -0400

With China’s credit-to-GDP ratio over 200%, it appears, as Barclays notes, that the PBoC is acting in line with the government’s efforts to deleverage, rebalance and position the economy towards a path for sustainable growth. Though they expect that the PBoC is likely to stabilize the interbank market in the near term (perhaps by more of the same ‘isolated’ cash injections), short-term rates are likely to remain elevated, at least for a while, possibly leading to the failing of some smaller financial institutions. With the small- and medium-sized banks having grown considerably quicker than the larger banks, having been more aggressive on interbank business (i.e. alternative channels to get around lending constraints), thefollowing banks are at most risk of major disturbance of the funding markets remain stressed leaving the potential for retail bank runs or greater fragmentation in the commercial bank market. Read more of this post

Big Steel is a very big problem for China; Wisco is a large part of an ailing, inefficient industry that Beijing appears unable to discipline

June 19, 2013 5:07 pm

Big Steel has become a very big problem for China

By John Gapper

Wisco is a large part of an ailing, inefficient industry that Beijing appears unable to discipline

Even by China’s standards, Wuhan Iron & Steel is enormous. As we drive along the four-lane highway beside the 22 sq km site – with its eight blast furnaces, hot and cold rolling mills, port on the Yangtze River and Red Steel City workers’ town where 300,000 people live – the scale of Mao Zedong’s favourite steelworks is staggering.

It has its own Guggenheim-like museum, displaying photographs of every Chinese leader, from Mao through Deng Xiaoping to Xi Jinping, the president, and Li Keqiang, the premier, visiting the plant. It dominates the Qingshan district of Wuhan, a rapidly expanding city of 10m in Hubei province that is building a 12-line subway system – and eight satellite cities – to cope. Read more of this post

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

Here Is What’s Going On In China: The Bronze Swan Redux

Tyler Durden on 06/20/2013 11:15 -0400

A month ago, when stock markets around the globe were hitting all time highs, we wrote “The Bronze Swan Arrives: Is The End Of Copper Financing China’s “Lehman Event”?” which as so often happens, many read, but few appreciated for what it truly was – the end of a major shadow leverage conduit (one involving unlimited rehypothecation at that),and the collapse of a core source of shadow liquidity. One month later, China’s “Lehman event” is on the verge of appearing, and with Overnight repo rates hitting 25% last night, coupled with rumors of bank bailouts rampant, it very well already may have but don’t expect the secretive Chinese politburo and PBOC to disclose it any time soon. So now that the market has finally once again caught up with reality, for the benefit of all those who missed it the first time, here is, once again, a look at the arrival of China’s Bronze Swan.

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Chinese Miners Suffer Hangover after Recent Binge Buying and many ran into problems with overseas deals

06.19.2013 16:48

Chinese Miners Suffer Hangover after Recent Binge Buying

Firms’ appetite for new purchases has dwindled after many ran into problems with overseas deals

By staff reporters Pu Jun and Zhang Boling

(Beijing) — The international mining industry saw mergers and acquisitions slow in 2012.

Accounting firm PricewaterhouseCoopers says a total of 1,803 M&As were reported in the international mining sector last year, down 30 percent from 2011 and the lowest level since 2005. The total transaction value was US$ 110 billion, down 26 percent from 2011. The slowdown has continued this year. Read more of this post

U.S. Icons Now Made of Chinese Steel; The Verrazano-Narrows Bridge was a feat of American engineering when it was built across New York’s harbor in the 1960s. Now, it’s being repaired with steel made in China

June 19, 2013, 9:02 p.m. ET

U.S. Icons Now Made of Chinese Steel

Imports Surge While U.S. Mills Idle; Lacking Bridge Expertise at Home

By JOHN W. MILLER and CHUIN-WEI YAP

The Verrazano-Narrows Bridge was a feat of American engineering when it was built across New York’s harbor in the 1960s. Now, it’s being repaired with steel made in China. Chinese steel imports have surged so far this year, even as U.S. producers are awash with excess domestic capacity. Chinese steel was also recently used in the San Francisco-Oakland Bay Bridge. The reason is partly because Chinese-made steel is cheaper. In fact, U.S. steel companies argue its price is unfairly subsidized, and want the U.S. government to restrict imports as much as possible. China claims it is simply a more efficient producer.

Read more of this post

Capital of Chinese Province With Worst Smog Restricts Car Sales

Capital of Chinese Province With Worst Smog Restricts Car Sales

One of China’s most polluted cities will limit vehicle ownership through a lottery, becoming the latest locality to do so in the world’s largest auto market as air quality and traffic congestion worsen.

Shijiazhuang, the capital of steel-producing Hebei province surrounding Beijing, will restrict the number of new vehicles to 100,000 this year and limit households to owning two cars, according to a Shijiazhuang Daily report posted on the local government’s website today. That quota will be cut to 90,000 in 2015, with a lottery being used to determine who can buy cars, the report said. Read more of this post