China Everbright Bank placed itself directly in the firing line when reports it had defaulted started to circle

Swimming naked in China

David Keohane

| Jun 10 12:19 | 5 comments | Share

China Everbright Bank placed itself directly in the firing line of terrible puns last week when reports it had defaulted started to circle.

Thankfully, Anne Stevenson-Yang from J Capital read into the news a bit further than most:

The interbank defaults last Thursday provided definitive, if indirect, proof that the cash coming into China is for financial investment and interest arbitrage. It masquerades as a trade surplus but is not. With the tightening of the domestic central bank credit window, Chinese banks are heavily dependent on these inflows for the cash they need to roll over loans. That is why the banks immediately went into distress when regulators decided to clamp down on fraud on the trade account. Read more of this post

Strains Show in China’s Job Market; Labor Strife Increases as High Wages, Low Demand Send Some Employers Packing, While Others Close

Updated June 11, 2013, 2:27 a.m. ET

Strains Show in China’s Job Market

Labor Strife Increases as High Wages, Low Demand Send Some Employers Packing, While Others Close

BEIJING—A wave of strikes and worker protests in China’s southern export belt is a fresh sign that slowing growth and rising wages have started to pinch the labor market on the world’s factory floor.

China Labour Bulletin, a Hong Kong-based labor group, has recorded 201 cases of labor disputes, including strikes, in the first four months of the year in China, almost double the number of cases in the same period last year. In the export hub of Shenzhen alone, 17 cases have been recorded. Read more of this post

Shock over departure of creative director behind Mulberry’s rise to top

Shock over departure of creative director behind Mulberry’s rise to top

Shares plunge 8% on news of Emma Hill’s decision to quit after rumoured row with company’s chief executive

Simon Neville and Lauren Cochrane

The Guardian, Monday 10 June 2013 22.56 BST

Emma Hill has announced her intention to quit Mulberry. Photograph: Mulberry

The woman widely credited with transforming Mulberry from a quiet British fashion house into a must-have global brand has shocked the luxury goods world, and the City, by announcing her intention to quit, in a move that wiped nearly £40m off the company’s value. Emma Hill joined Mulberry as creative director at the depth of the recession in 2008 and, hitching the firm’s conservative reputation to hipster royalty such as Alexa Chung and Lana Del Rey, helped spur a fivefold increase in its share price. Mulberry issued a terse confirmation that one of the industry’s most successful partnerships is coming to an end, amid rumours of a falling out between Hill and the chief executive, Bruno Guillon, over the company’s direction. Read more of this post

Australian Dollar Plunges as Home Loans Dive; Australia Insolvencies Hit Record

Australian Dollar Plunges as Home Loans Dive; Australia Insolvencies Hit Record; Worst is Yet to Come

Posted: 10 Jun 2013 08:32 PM PDT

Mike “Mish” Shedlock

Curve Watchers Anonymous has its eye on the Australian dollar. As expected, it has taken a big dive in conjunction with a housing bust and a slowdown in China that impacts the demand for commodities.

The only thing surprising to me about this plunge is how long it took, but here we are.
Aussie Falls to Lowest in More Than Two Years
Bloomberg reports Aussie Falls to Lowest in More Than Two Years as Home Loans Slow

Australia’s dollar fell to the lowest in more than two years versus the greenback after home-loan approvals grew at the slowest pace in three months, boosting the case for further cuts to borrowing costs. Read more of this post

Global shale resources are vast enough to cover more than a decade of oil consumption, according to the first-ever US assessment of reserves from Russia to Argentina.

June 10, 2013 7:53 pm

World has 10 years of shale oil, reports US

By Gregory Meyer in New York

Global shale resources are vast enough to cover more than a decade of oil consumption, according to the first-ever US assessment of reserves from Russia to Argentina.

The US Department of Energy estimated “technically recoverable” shale oil resources of 345bn barrels in 42 countries it surveyed, or 10 per cent of global crude supplies. The department had previously only provided an estimate for US shale reserves, which it on Monday increased from 32bn barrels to 58bn. Read more of this post

Fitch warns on risks from shadow banking in China; “A 1 percent NPL ratio has little signaling value when 36% of all outstanding credit resides outside Chinese banks’ loan portfolios”

Fitch warns on risks from shadow banking in China

12:56pm EDT

FRANKFURT (Reuters) – China’s unregulated shadow banking sector poses an increasing risk to the country’s financial stability that could spread to other countries, credit rating agency Fitch said on Monday. China has tens of thousands of non-bank lenders that are providing increasing amounts of credit to businesses and government outside the mainstream, regulated banking sector, a situation that is stoking systemic risk, Fitch said. There is little visibility on where the money is going, who is lending it or what the credit quality of assets is, meaning traditional warning signs of trouble will not function properly. “It is a wild west atmosphere in many respects and that is one of the reasons why we are so worried,” Fitch Senior Director Charlene Chu told a conference in Frankfurt. Regulators had little insight into the non-bank sector. “It is a material risk because a growing amount of credit is being extended through channels that they don’t have transparency or control over,” Chu said. Read more of this post

Pimco Wary on Asia Junk Debt as Slowdown Hurts Company Profits

Pimco Wary on Asia Junk Debt as Slowdown Hurts Company Profits

Investors should be wary of high-yield borrowers as slowing growth in Asia threatens profitability, according to Pacific Investment Management Co., manager of the world’s biggest fixed-income fund.

Companies in Asia outside Japan almost tripled junk bond sales to $19.2 billion this year compared with $6.85 billion during the same period in 2012, data compiled by Bloomberg show. China’s economy will slow to average 6 percent to 7.5 percent annual expansion during the next five years from 9 percent the past five, weighing on the region’s growth, according to a report from Newport Beach, California-based Pimco.

“The slow-growth landscape favors higher-quality credits and warrants caution on higher yielding names that could become impaired in an environment where profits will be challenged,” Tokyo-based Tomoya Masanao, the head of portfolio management for Japan, wrote in the report due for release today. “The emphasis should move away from risk assets that have benefited purely from the central bank liquidity wave in which valuations have become detached from fundamentals.” Read more of this post

India Rate-Cut Room Dented as Rupee Drops Most in Asia to Record; “Currency stability has become a new worry”

India Rate-Cut Room Dented as Rupee Drops Most in Asia to Record

The slump in the rupee to a record low has narrowed the Reserve Bank of India’s scope to cut interest rates next week for a fourth straight meeting. Governor Duvvuri Subbarao will keep the repurchase rate at 7.25 percent on June 17, 10 of 18 analysts said in a Bloomberg News survey. The rest called for a reduction to 7 percent. The currency’s 6.6 percent drop versus the dollar this quarter, the biggest in Asia, threatens to make imports more expensive. The rupee reached its weakest level yesterday, weighed down by an unprecedented current-account deficit, the slowest Indian economic expansion in a decade and speculation the dollar will gain if the U.S. scales back monetary stimulus. Subbarao said May 30 that depreciation may stoke inflation and increase the cost of servicing foreign-currency debt.

“Currency stability has become a new worry,” said Rajeev Malik, an economist at CLSA Asia-Pacific Markets in Singapore. “A rate cut is unlikely to do much in reviving growth, but it will renew the pressure on the rupee to weaken further.” Read more of this post

Hard part begins in Myanmar’s quest for foreign investment; “Actually there isn’t that much investment coming in,” Nobel Peace laureate and opposition leader Suu Kyi

Hard part begins in Myanmar’s quest for foreign investment

NAYPYITAW — In a cramped auditorium in Myanmar’s capital, pro-democracy champion Aung San Suu Kyi had a message for the world’s business elite: Her country is teeming with foreign investors scouting for opportunities in one of Asia’s final frontier markets, but not many are actually investing.

BY –13 HOURS 3 MIN AGO

NAYPYITAW — In a cramped auditorium in Myanmar’s capital, pro-democracy champion Aung San Suu Kyi had a message for the world’s business elite: Her country is teeming with foreign investors scouting for opportunities in one of Asia’s final frontier markets, but not many are actually investing.

Interviews with foreign and local business leaders on the sidelines of last week’s World Economic Forum in the Myanmar capital, Naypyitaw, show why.

Shoddy infrastructure, opaque regulations, red tape, recent bouts of sectarian violence and lingering uncertainty over US sanctions are hampering large-scale foreign investment in the country, strategically nestled between India and China. “Actually there isn’t that much investment coming in,” Nobel Peace laureate and opposition leader Suu Kyi told reporters. Read more of this post

Casino Dubai’s Rebound Pitch Ignored by Global Investors

Casino Dubai’s Rebound Pitch Ignored by Global Investors

Dubai is back with the big plans. What it doesn’t have are the biggest property investors.

Surging home prices in parts of Dubai and rebounding shopping and tourism markets are prompting developers to announce projects on a scale not seen since the emirate’s property market collapsed in 2008. So far, sovereign wealth, pension and insurance funds are staying away even as they splurge on real estate elsewhere.

“It’s a thin market and it has a reputation of being something of a casino,” said Richard Price, chief executive for Asia at CBRE Global Investors, which manages $93 billion of property assets. “I struggle to think of any real client appetite for exposure.” Read more of this post

History may repeat itself for Mexico, Peru as Fed eyes exit

History may repeat itself for Mexico, Peru as Fed eyes exit

Sun, Jun 9 2013

By Krista Hughes

MEXICO CITY (Reuters) – Mexico and Peru’s popularity among foreign investors means they are among the emerging market economies most exposed to losses when the United States finally moves to take its foot off the monetary accelerator. History shows that when U.S. interest rates jump – widely anticipated when the Federal Reserve begins reducing its $85 billion a month bond purchases – new foreign investment in Peruvian and Mexican financial assets drops by almost two-thirds. Bonds in Brazil, Colombia and Peru also sold off and major Latin American currencies fell on average 5.5 percent on the mere hint of a limit to the cheap cash that has pushed many emerging markets to record highs. Read more of this post

Spain’s ownership web set to untangle

June 9, 2013 12:53 pm

Spain’s ownership web set to untangle

By Miles Johnson in Madrid

Spanish business, it is said, can be a small place. Whether they are sharing bottles of rioja at upmarket Madrid restaurants, or the same classrooms, or even the same blood, large parts of the country’s business elite have ties that stretch back generations. This cosy, interconnected world is epitomised by the nexus of cross-shareholdings between banks and many of Spain’s largest companies, largely constructed during the past two decades. Out of the 35 companies in the Ibex stock index, 15 are connected to another member though a significant shareholding. If Bankia, the nationalised savings bank recently dropped from the index, were included, that figure would rise to 19. With the financial crisis having ripped through the balance sheets of the caja system, corporate Spain is undergoing an upheaval. As capital-strapped lendersare forced to sell non-core holdings, this long-standing and complicated web of cross-shareholdings is at risk of disappearing. Read more of this post