China’s Ordos, the Chinese ghost city known for its empty skyscrapers is struggling to repay debt and has resorted to borrowing from companies to pay workers

China’s Ordos Struggles to Repay Debt: Xinhua Magazine

A Chinese city known for its empty skyscrapers is struggling to repay debt and has resorted to borrowing from companies to pay workers, a magazine published by the official Xinhua News Agency reported. Some district governments of Ordos, Inner Mongolia, had to borrow money from companies to pay salaries of municipal employees, Economy & Nation Weekly said in a July 5 report on its website. Ordos local-government entities have amassed 240 billion yuan ($39 billion) of debt, while the city had 37.5 billion yuan of revenue last year, the publication said without specifying annual interest costs. The report adds to signs of strains in an economy that probably decelerated for a second straight quarter as overseas and domestic demand slowed and Premier Li Keqiang reined in credit growth. China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country’s biggest shipyard outside state control, said last week it’s seeking financial support from the government after orders plunged. “Isolated default cases will happen in places like Ordos – – people know investment in these places is unsustainable,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. Two phone calls to Ordos’s government general affairs office went unanswered. The city is also known as Erdos. Vice Finance Minister Zhu Guangyao said last week that China should be on “high alert” to risks in local government debt. Coal-rich Ordos is known for a building frenzy in recent years, including a new area named Kangbashi that was designed to accommodate 300,000 people.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

China Cash Squeeze Seen Creating Vietnam-Size Credit Hole

China Cash Squeeze Seen Creating Vietnam-Size Credit Hole

China’s money-market cash squeeze is likely to reduce credit growth this year by 750 billion yuan ($122 billion), an amount equivalent to the size of Vietnam’s economy, according to a Bloomberg News survey. The number is the median estimate of 15 analysts, whose projections last week ranged from cuts of 20 billion yuan to 3 trillion yuan. The majority of respondents also said they approve of the government’s handling of the credit crunch and said the episode reinforces their expectations for policy reforms such as loosening controls on interest rates. Read more of this post

Red tape, graft mean India not such a super market for Wal-Mart

Red tape, graft mean India not such a super market for Wal-Mart

5:12pm EDT

By Nandita Bose

MUMBAI (Reuters) – Wal-Mart’s India expansion is stalled. When India announced last September that it would allow foreign supermarket chains to take majority ownership of their Indian operations, it marked a victory for Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz), which had spearheaded efforts to open the market and said its first retail store would open within two years. Now, two sources within the Bentonville, Arkansas-based company’s Indian unit say it is unlikely to apply for its first retail store license before March 2015. The company has said it needs a further 12 to 18 months after winning government approval to open each store, which means its first retail outlet in the country would open in 2016 at the earliest. Read more of this post

Some Korean family-run brokerage firms and securities units of conglomerates are under fire for paying out high dividends to their shareholders despite worsening profitability

2013-07-08 19:01

Hyundai, Daishin under criticism

Firms pay high dividends despite poor performance
By Na Jeong-ju
Some family-run brokerage firms and securities units of conglomerates are under fire for paying out high dividends to their shareholders despite worsening profitability.
Hyundai Securities, an affiliate of Hyundai Group, paid 44.4 billion won in dividends last year although the firm recorded 2.1 billion won in losses. The securities firm’s largest shareholder is Hyundai Merchant Marine with a 25.9 percent stake. Other Hyundai affiliates are also key shareholders of Hyundai Securities. Read more of this post

Xi’an to invest US$6bn to rebuild palace of China’s first emperor Qin Shihuang; Beijing calls for gov’t agencies to cut spending by 5%

Xi’an to invest US$6bn to rebuild palace of China’s first emperor

Staff Reporter 2013-07-08

The Epang Palace in Xi’an was the seat of Qin Shihuang, the first emperor to rule a unified China. (Photo/CFP)

The government of Xi’an in northwestern China has signed a contract worth 38 billion yuan (US$6.2 billion) to develop tourism centered on the the Epang Palace, an ancient palace more than 2,000 years in the provincial capital of Shaanxi, reports the China Business Journal run by the Chinese Academy of Social Sciences. The city government has signed the contract with the Beijing Capital Group, a state-owned enterprise with interests in infrastructure, real estate and financial services. The project plans to invest 3 billion yuan (US$480 million) to rebuild a park for the palace and make it the center of the tourist attraction. An additional 8 billion yuan (US$1.3 billion) will be invested in further tourist infrastructure at the site. The project will develop human resources around the site, said a staff member from the city government, who said a museum, arts center, conference center and cultural center will be built. The Epang Palace was located in western Xi’an. It was a palace complex built in the Qin Dynasty in 212 BC and was the home of Qin Shihuang, the first emperor to rule a unified China.

Beijing calls for gov’t agencies to cut spending by 5%

Xinhua 2013-07-08

China’s Ministry of Finance has issued a circular ordering central government agencies to cut their general expenditures this year by 5%, a move to push the frugality campaign launched by the current leadership under president Xi Jinping. According to the circular, a whole slew of fees shall be cut including money spent on the building and renovation of government offices, meetings, domestic and overseas trips, vehicles and official receptions. The circular also calls for more efficient uses of money by the government agencies, with the aim of improving people’s livelihood. Xi Jinping and his government have vowed to fight corruption and extravagance since he took office early this year.

Salesmen march against HK property cooling measures as deals ‘dive to SARS-crisis levels’

Salesmen march against HK property cooling measures

Sunday, Jul 07, 2013

AFP

HONG KONG – Thousands of real estate agents took to Hong Kong’s streets Sunday in protest at government efforts to curb soaring property prices, saying new transaction taxes and other measures are threatening their business. “There are 37,000 agents in Hong Kong and there were only 3,000 transactions last month,” said Raymond Ho, a spokesman for the rally organisers. “The policies have frozen the market. A lot of small property agent firms will close in the future,” he told AFP. Read more of this post

Is struggling shipbuilder China Rongsheng too big to fail?

Is struggling shipbuilder China Rongsheng too big to fail?

5:05pm EDT

By Koh Gui Qing and Yimou Lee

HONG KONG/BEIJING (Reuters) – An appeal for government financial support from China’s biggest private shipbuilder presents authorities with some stark choices between protecting a big employer and its jobs or letting the firm go under to ease pressure on a sector suffering from overcapacity and sharply falling new orders. Since Beijing appears intent on telling investors it is serious about changing the investment-led growth model of the world’s second-biggest economy and controlling a credit splurge, it may seem like the writing is on the wall for China Rongsheng Heavy Industries Group (1101.HK:Quote, Profile, Research, Stock Buzz). Yet analysts say the government is more likely than not to judge that Rongsheng, which employs around 20,000 workers and has received state patronage, is too big and well connected to fail. Read more of this post

Chinese banking: a Wild West in the Far East? China’s banks are now the biggest in the world but fears are growing they are very unstable

Chinese banking: a Wild West in the Far East?

China’s banks are now the biggest in the world but fears are growing they are very unstable, writes Harry Wilson.

By Harry Wilson

8:00PM BST 06 Jul 2013

As Government ministers ponder whether to split Royal Bank of Scotland into a “good bank” and a “bad bank”, it is worth remembering that China did something similar with not one big lender, but four at the turn of the millennium. In October 1999, a month before Fred Goodwin began his ill-fated reign as chief executive of RBS, the Chinese government created four massive “asset management companies” that would eventually take on toxic loans valued at $480bn (£320bn). Thirteen years on, these bad banks still exist, operating out of office blocks dotted around Beijing and Hong Kong, and continue to hold non-performing loans worth Rmb1.7 trillion (£180bn), according to credit rating agency Moody’s. Largely unknown to the outside world, they are a reminder that China’s banking system remains as prone to boom and bust as any Western economy and perhaps more so. As the rescue showed, the “Big Four” banks were, and are, not just “too big to fail”, but the beating heart of the entire Chinese economic system, controlling nearly half the country’s $19 trillion of financial assets. Read more of this post

Emerging Markets: A Career-Killing Sequel?

SATURDAY, JULY 6, 2013

A Career-Killing Sequel?

By BEN LEVISOHN | MORE ARTICLES BY AUTHOR

Emerging markets stocks were on a tear—until they stopped. This year has been the Hudson Hawk to what had been akin to the Die Hard franchise. The good news is that stocks are looking cheap; the bad is that they could still get cheaper.

After the blockbuster success of the Die Hard franchise, moviegoers thought they knew what they were getting from a new Bruce Willis flick: action, adventure and a wisecracking hero. In 1991, however, they got Hudson Hawk, a movie about a show-tune singing cat burglar robbing the Vatican. The film bombed. Investors in the emerging markets can relate. For years, they’ve bought into the narrative that the developing world’s faster economic growth, improving credit quality, and increased stability would lead to supersized returns. And for a while, they did. Emerging markets stocks rose 12% annually for the ten years ended Dec. 31, 2012. Read more of this post

One Born Every Minute; As exchange-traded funds pour into the market, more of them are of dubious value. Consider the Bitcoin ETF

| SATURDAY, JULY 6, 2013

One Born Every Minute

By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR

As exchange-traded funds pour into the market, more of them are of dubious value. Consider the Bitcoin ETF. “There’s an app for that” is the mantra behind the boom in smartphones, turning them from things used just to make calls and send texts, to devices that put mobile computing in the palm of your hand or your pocket (well, almost, as screens steadily expand in size). Financial markets have seen a parallel phenomenon: “There’s an ETF for that,” for all manner of things. And, as with smartphone apps, a few exchange-traded funds dominate the market, alongside thousands of dubious offerings. Read more of this post

Proposed EU financial transaction tax will hit FX users hard

EU financial transaction tax will hit FX users hard: report

7:03pm EDT

By Sebastian Sadr-Salek

LONDON (Reuters) – A proposed EU financial transaction tax (FTT) could discourage use of the foreign exchange (FX) market by typically raising costs of doing business by up to 700 percent, a report said on Monday. The report by the Global Financial Markets Association (GFMA) said that due to the double-sided nature of the proposed tax, transaction costs for pension funds would increase by around 1,500 percent. And they could reach as high as 4,700 percent for some FX products such as those that involve short-dated swaps with a very low transaction cost. Read more of this post

Crowded ETF Exit Proving Costly as Bonds Trail

Crowded ETF Exit Proving Costly as Bonds Trail: Credit Markets

Investors who sought exchange-traded funds as a faster way to trade corporate bonds are finding that they can be as expensive to trade as the underlying debt.

As trading in the three-biggest credit ETFs surged to unprecedented levels last month amid the market’s biggest losses since 2008, the funds’ shares dropped as much as 1.1 percentage points more than the net value of the less-traded securities they hold. The two largest high-yield bond ETFs have lost about 6 percent since reaching a five-year high May 8. That’s about 2 percentage points more than the loss for the Bank of America Merrill Lynch U.S. High Yield Index. Read more of this post

Losing $317 Billion Makes Treasuries Safer for Mizuho to HSBC

Losing $317 Billion Makes Treasuries Safer for Mizuho to HSBC

The biggest investors in Asia and Europe are keeping their money in Treasuries even after the steepest two-month loss for the securities erased $317 billion of market value.

Mizuho Asset Management Co., which oversees $32 billion, added Treasuries due in 10 years or longer to its holdings in the past month. HSBC Private Bank, with $480 billion in assets, bought U.S. notes when 10-year yields rose to 2.5 percent. Deutsche Asset & Wealth Management, which manages about $1.3 trillion, is holding debt maturing in less than four years, betting American interest rates will remain subdued. Read more of this post

For Europe’s Debt Collectors, More Work Isn’t Paying Off

July 7, 2013, 6:52 p.m. ET

For Europe’s Debt Collectors, More Work Isn’t Paying Off

MANUELA MESCO

MILAN—In Europe, bad debts are soaring, the economy is contracting and business owners are flocking to debt-collection agencies to chase down deadbeat clients. Yet the boom in bad debt is bringing surprisingly little joy to the Continent’s repo men. Clogged courts, tough debt-collection rules and tapped-out debtors are making their jobs harder—and less profitable. Consider Marco Alborghetti, a Rome-based debt collector. He recently resolved a case involving a €10,000 ($12,825) debt owed to a client, the owner of a leasing company. It took 10 years to pursue the debtor through Italian courts. While the client recovered the entire amount, Mr. Alborghetti says the hassle, as well as the cost of hiring lawyers to pursue the case, hardly made the job worth it. “It’s just uneconomical for everyone involved,” he said. Read more of this post

Record numbers of exchange traded funds have closed so far this year, underscoring the difficulty many of the investment vehicles face in gaining traction among investors, despite the industry’s overall boom in popularity in recent years

July 7, 2013 2:11 pm

ETFs close in record numbers despite industry boom

By Arash Massoudi and Tracy Alloway in New York

Record numbers of exchange traded funds have closed so far this year, underscoring the difficulty many of the investment vehicles face in gaining traction among investors, despite the industry’s overall boom in popularity in recent years. About 117 ETFs have shuttered in the first half of this year, according to data collected by independent research firm ETFGI, easily outpacing closures in the same period in previous years. Out of 4,849 exchange traded products on the market, more than 60 per cent have less than $100m in assets, suggesting that more closures could take place in the coming months. Read more of this post