Banks’ Capital Estimates Seen Overstated; Regulators’ Report Is Liable to Support Push Toward Tighter Rules for Lenders

July 5, 2013, 12:50 p.m. ET

Banks’ Capital Estimates Seen Overstated

Regulators’ Report Is Liable to Support Push Toward Tighter Rules for Lenders

GEOFFREY T. SMITH

The discretion banks use in judging the riskiness of their long-term assets can overstate their capital ratios by up to 20%, global regulators said in a final report on the subject Friday. The long-awaited report, by the Basel Committee on Banking Supervision, appeared to confirm what many outside the banking industry had long suspected: that banks have a structural bias to understate the risk embedded in the vast majority of their investments, so as to make them look better-capitalized and protected against possible shocks than they actually are. Read more of this post

Real Returns: Are Private-Equity Gains Built to Last?

July 5, 2013, 6:05 p.m. ET

Real Returns: Are Private-Equity Gains Built to Last?

MARK HULBERT

A new study shows that one of the chief benefits of private-equity firms is largely an illusion. The study comes as Dell DELL -2.10% shareholders prepare for a July 18 vote on whether to accept a bid from founder Michael Dell and private-equity firm Silver Lake Partners to take the company private at $13.65 a share.

To be sure, many private-equity buyout funds have in the past produced superior returns. But their fees are steep—typically 2% of assets plus 20% of any profits. And many of their advantages are either ephemeral or can be replicated at a much lower cost. Read more of this post

China: Private Banks Possible in Sweeping Reform

China: Private Banks Possible in Sweeping Reform

Friday, 05 Jul 2013 07:32 AM

China on Friday promised sweeping changes to its state-run banking industry — including allowing the creation of private lenders — to support its credit-starved entrepreneurs and curb what regulators worry are growing financial risks.

Analysts including the World Bank say an overhaul of a Chinese banking system that lends little to private businesses is urgently needed to keep economic growth strong. Communist leaders who took power last year have promised to support entrepreneurs who generate China’s new jobs and wealth, but have yet to make significant changes. Read more of this post

Mortgage REITs Slide Most Since 2011 on Fed Tapering Concern

Mortgage REITs Slide Most Since 2011 on Fed Tapering Concern

Real estate investment trusts that buy mortgage debt slumped after a better-than-forecast employment report stoked speculation the Federal Reserve will begin to reduce the size of its asset purchases.

A Bloomberg index of shares in the REITs tumbled 3.9 percent as of 4:40 p.m. in New York, the largest drop since October 2011. Annaly Capital Management Inc. (NLY), the largest of the companies, and American Capital Agency Corp. (AGNC), the second biggest, each plunged more than 5 percent. Read more of this post

Trades Rival University Degrees for Canada Labor Market

Trades Rival University Degrees for Canada Labor Market

Ellie MacRae is taking summer classes to accelerate a four-year degree in early childhood studies, even as she worries her efforts won’t pay off like her boyfriend’s electrical training.

“Undergraduate degrees don’t get you a job,” said MacRae, 21, who is in her second year at Toronto’s Ryerson University. Her boyfriend “will have an easier time finding a job than me – – there’s just a lot more opportunities in the trades.” Read more of this post

Which State Drinks The Most (And Least) Beer?

Which State Drinks The Most (And Least) Beer?

Tyler Durden on 07/04/2013 19:55 -0400

On a day when the underlying reason for celebration in the US is often washed away by a few gallons of alcohol, we thought it timely to see just which states are the biggest soaks. It is likely no surprise that Utah is the driest state but the top 4 states seem head and shoulders above the rest with North Dakota topping the list at 45.8 gallons of beer per capita per year (or an average of just over 1 pint per day – which seems very reasonable?). Only 4 states have seen consumption per capita rise in the last 5 years – Vermont (+8.34%), North Dakota (+7.5%), Maine (+3.45%) and New Hampshire (+0.34%) – while Nevada (-16.42%), Washington (-15.24%), and Florida (-15.01%) are sobering up the fastest…

China signals will cut off credit to rebalance economy

China signals will cut off credit to rebalance economy

7:21am EDT

By Koh Gui Qing and Langi Chiang

BEIJING (Reuters) – China said on Friday it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt. In a statement from the State Council, or cabinet, Beijing laid out broad plans to ensure banks support the kind of economic rebalancing China’s new leadership wants as it looks to focus more on high-end manufacturing. Read more of this post

China Vice Finance Minister Urges ‘High Alert’ on Local Debt

China Vice Finance Minister Urges ‘High Alert’ on Local Debt

A Chinese vice finance minister warned the nation must be on “high alert” to the dangers of rising debt in companies set up by local governments to fund investment projects.

“Prominent risks are not only in the shadow-banking area but also in local government financing vehicles, and we do need to be on high alert,” Zhu Guangyao said at a briefing in Beijing today. At the same time, companies are mainly investing in infrastructure projects with relatively good operations and repayment abilities, he said. Read more of this post

PBOC to Extend Cash Crunch as Zhou Discovers Flaws

PBOC to Extend Cash Crunch as Zhou Discovers Flaws

China’s finance companies predict central bank Governor Zhou Xiaochuan will extend a cash crunch, albeit without June’s dramatic swings, as he calls for the market to “discover and correct” excessive lending.

The seven-day repurchase rate, which measures interbank funding availability, may average 4 percent in the third quarter, compared with 3.62 percent in the past year, according to the median estimate in a Bloomberg survey of eight analysts. The rate surged to a record 10.8 percent on June 20, and averaged 4.49 percent last quarter, the highest since the National Interbank Funding Center started compiling the data in 2003. The similar rate in India fell 73 basis points. Read more of this post

China Probes Tetra Pak for Abuse of Market Control; China Probes 60 Drugmakers in Effort to Curb Drug Prices

China Probes Tetra Pak for Abuse of Market Control, Xinhua Says

China is probing Switzerland-based food-packaging company Tetra Pak Group for possible abuse of market dominance, the official Xinhua News Agency reported today, citing the State Administration for Industry & Commerce.

The market watchdog has organized more than 20 of its regional agencies to investigate the allegations, Xinhua said without giving further details. Three telephone calls to the watchdog’s press office in Beijing weren’t answered. Calls to Tetra Pak’s Shanghai office were also not answered. Read more of this post

Christmas Candy Stockpiled in July as Aussie Slump Looms

Christmas Candy Stockpiled in July as Aussie Slump Looms

Andy Adams has already bought his Christmas candy. With the Australian dollar down 12 percent in its longest losing streak since the 2008 financial crisis, he’s stocking his food store early in anticipation of a further fall.

“We basically doubled the size of our last order. We had to,” said Adams, whose British Sweets and Treats store in the Sydney suburb of Bondi caters to U.K., Irish and American expats craving Maynards Wine Gums, Barry’s Tea, and Baby Ruth bars. “We know the dollar’s going to creep down, so we’re trying to grab it now at a reasonable price.” Read more of this post

Three Thai tycoons are warning of a nascent economic bubble, blaming policies that have encouraged consumers to take on debt while the government borrows hugely to spur the economy

Tycoons of disaster urge caution; State policies creating a bubble, they warn

Published: 4 Jul 2013 at 23.52

From left, Sawasdi Horrungruang, Boonchai Bencharongkul and Prachai Leophairatana. The three business tycoons discussed how they survived the 1997 crisis. (Photo by Pawat Laopaisarntaksin)

Three businessmen who lost most of their empires during the tom yum kung crisis are warning of a nascent economic bubble, blaming policies that have encouraged consumers to take on debt while the government borrows hugely to spur the economy. Boonchai Bencharongkul, a founder of No.2 mobile operator Total Access Communication (DTAC), voiced concern about a potential new crisis forming. “I think the current situation is worrisome. As one of those who had such an experience, I can smell it now. People are rushing and competing to buy condos while more and more people are driving Ferraris. These are the same things we saw before the 1997 crisis occurred,” Mr Boonchai told a forum hosted by Thansettakij newspaper Thursday. He said populist policies such as the first-time car buyer tax rebate have prodded people to borrow from banks as part of the government’s attempt to boost gross domestic product (GDP). “Don’t focus so much on GDP. In the end, people really care about how much money they have left in their pockets,” he said. Read more of this post

China Rongsheng, the nation’s biggest shipyard outside state control, is seeking support from the government and its largest shareholder amid a plunge in orders and prices

China Rongsheng’s Call for Government Support Drives Down Shares

China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the nation’s biggest shipyard outside state control, is seeking support from the government and its largest shareholder amid a plunge in orders and prices. The shares fell.

The shipbuilder had a net loss in the first half, it said in a filing on preliminary earnings to Hong Kong’s stock exchange today. Rongsheng, which reported its first annual loss since 2008 last year, dropped 9.4 percent to 96 Hong Kong cents as of 9:31 in Hong Kong trading. Read more of this post

One-Third of China Shipyards Face Closure as Orders Slump

One-Third of China Shipyards Face Closure as Orders Slump

By Jasmine Wang – Jul 4, 2013

China, the world’s biggest shipbuilding nation, may see a third of its yards shut down in about five years as they struggle to win orders amid a global vessel glut, an industry group said. The yards in peril of closure have failed to get any orders “for a very long period of time,” Wang Jinlian, secretary general of the China Association of National Shipbuilding Industry, said in an interview yesterday. They may end operations in three to five years if the “gloomy market persists.” The nation has more than 1,600 shipyards.

Read more of this post

China Suspends PMI Details in New Hurdle for Scrutiny of Economy

China Suspends PMI Details in New Hurdle for Scrutiny of Economy

China suspended the release of industry-specific data from a monthly survey of manufacturing purchasing managers, with an official saying there’s limited time to analyze the large volume of responses.

“We now have 3,000 samples in the survey, and from a technical point of view, time is very limited — there are many industries, you know,” Cai Jin, vice president of the China Federation of Logistics & Purchasing, which compiles the data with the National Bureau of Statistics, told reporters yesterday in Beijing. Read more of this post

Few Roads Leading to China Tell Tale of Mongolia Fears

Few Roads Leading to China Tell Tale of Mongolia Fears

Mongolia has a China complex.

Some 800 years after Genghis Khan forged its tribes into the world’s largest empire, Mongolians are awakening to lucrative — and unsettling — realities.

Lying beneath Mongolia’s storied lands are an estimated $1.3 trillion in mineral resources that could redraw global commodity maps, denting Australia’s coal, Brazil’s iron ore and Chile’s copper exports. A nation whose cultural icon remains the nomadic herder could become the next Kuwait and Qatar, examples of lightly populated countries grown luxuriously rich on the world’s thirst for commodities. Read more of this post

In China, a replica of Manhattan, the financial district of Yujiapu in the port city of Tianjin, loses its luster

In China, a replica of Manhattan loses its luster

by Rob Schmitz

Marketplace for Wednesday, July 3, 2013

The financial district of Yujiapu in the port city of Tianjin aims to be a rival to Manhattan within ten years. The government has spent billions building replicas of Rockefeller Center, Lincoln Center, and are building China’s largest high-speed rail station here. Economists question the district’s future. A construction worker rests underneath a bulldozer amidst the rubble of Yujiapu, one of the largest construction sites in the world, where the city of Tianjin is building dozens of skyscrapers in an effort to create one of the world’s largeste financial centers.

The buildings rising from a saltwater marsh in the port city of Tianjin looks an awful lot like New York City. But don’t be fooled, says Lin Lixue, a dapper young spokesman for a local developer. This Manhattan replica aims to be abigger Apple.

“Our goal is to create the world’s largest financial center, right here, within ten years,” says Lin. “We’re building skyscrapers, we’ve got China’s largest high-speed railway station coming soon, we’re building a tunnel under the sea, and we’ll soon build several subway lines.” Read more of this post

Beijing steps up centralisation of power to control provincial leaders

Beijing steps up centralisation of power to control provincial leaders

Friday, 05 July, 2013, 12:00am

Ivan Zhai and Echo Hui

More governors now have central government backgrounds and analysts say the trend of centralisation will continue for at least a decade

Beijing has sent more officials from ministries and state-owned enterprises to provinces during the latest leadership reshuffle, amid fears it may lose control of local governments, observers said. They say the trend of centralising power is likely to continue for at least a decade. More than 800 senior officials were elected to local governments, people’s congresses and people’s political consultative conferences during the reshuffle, which was wound up last week, Xinhua said. For the first time in nearly three decades, half of the 22 governors – most of whom were elected during the 18th party congress leadership reshuffle last year – had central government backgrounds, according to research by the Post. Five years ago, only two governors were directly installed by Beijing. Read more of this post

Central Bank Raises the Red Flag over P2P Lending Risks; “Some are selling wealth management products and guaranteeing loans under the banner of P2P business but they have gone beyond the scope of P2P lending.”

07.04.2013 16:29

Central Bank Raises the Red Flag over P2P Lending Risks

PBOC surveys find host of problems with companies offering peer-to-peer loans, and some worry the transactions amount to illegal fund raising

By staff reporters Li Xiaoxiao and Yang Lu

(Beijing) – A recent report by the central bank about peer-to-peer (P2P) lending websites in China has shed light on some severe problems in the business for which there is, as yet, little regulation. The original idea for P2P lending websites was that they were only a platform to match people with spare cash and those who need to borrow money. A typical transaction could see someone with cash to spare lend 5,000 yuan to a young couple wanting to decorate their new home. The attraction for lenders is that expected rates of return are mostly above 10 percent and some exceed 20 percent. In contrast, the annual interest rate on a one-year term deposit at banks is 3.25 percent. The industry started to take off in 2009, and now it is worth nearly 60 billion yuan. Read more of this post

Qatar: what next for the world’s most aggressive deal hunter? Nation must grapple with the end of sky-high returns

July 4, 2013 8:55 pm

Qatar: what next for the world’s most aggressive deal hunter?

By Camilla Hall, Simeon Kerr, Roula Khalaf, Lionel Barber, Patrick Jenkins and Ed Hammond

As the global economy recovers, the nation must grapple with the end of sky-high returns

On a visit last year to Qatar Holding’s headquarters, a Gulf banker stepped inside a boardroom, intrigued by what he glimpsed as he walked past. His attention fixed on a set of whiteboards, each scrawled with the names of an array of global companies. This, he suspected, was a shopping list. Some of the companies, including Valentino, the Italian fashion label, had already been bought by other Qatari investors. So had a stake in Germany’s Siemens, which was also on the boards. Printemps, a French department store, would be snapped up months later. “It was as if there was no company that doesn’t interest them,” the banker says. Read more of this post