Taiwan’s housing bubble is bigger than anyone admits

Taiwan’s housing bubble is bigger than anyone admits

Editorial 2013-07-03

Declining real income and surging housing prices in Taiwan continues to worsen, along with the stagnation in the country’s economy, even though the government has reiterated that it has taken stock and is trying to deal with the situation. Government data show that real income during first four months of this year dropped to a level comparable to 15 years ago, while the average unit price of new housing purchases in Taiwan’s six major metropolitan areas hit a record high of NT$245,000 (US$8,155) per ping (3.3 square meters) during the first quarter. Read more of this post

Gross Caught in TIPS Trap Gundlach Sidestepped in Tumble

Gross Caught in TIPS Trap Gundlach Sidestepped in Tumble

On April 19, three weeks before he called the end of the 30-year bull market in bonds, Bill Gross said he was buying inflation-linked Treasuries, a bet that money printing by the world’s central banks would push up consumer prices.

While Treasuries subsequently fell as he had predicted, so did inflation expectations, amplifying rather than limiting losses for Gross’s Pimco Total Return Fund (PTRAX), which had 12 percent of its $289 billion in Treasury Inflation-Protected Securities at the end of the first quarter. The world’s largest mutual fund fell 4.7 percent in May and June, prompting $9.9 billion in withdrawals last month, the most on record. Read more of this post

Bernanke Denies India to Mexico Rate Cuts as Currencies Sink

Bernanke Denies India to Mexico Rate Cuts as Currencies Sink

Traders who anticipated lower interest rates in developing nations are reversing course as prospects for reduced Federal Reserve economic stimulus sparks the worst rout in emerging-market currencies since 2001.

Just a month ago, central bankers in Mexico, India and South Korea were expected to pare borrowing costs at least once, according to interest-rate swaps data compiled by HSBC Holdings Plc. Now, the measures show no chance of cuts. Poland’s central bank said today that it has ended an easing cycle after lowering the benchmark rate to a record low 2.5 percent. Traders anticipate one more reduction in Hungary, instead of the two they expected a month ago. Read more of this post

Indian rupee record plunge is curbing demolition of obsolete merchant vessels, exacerbating a fleet surplus; “Indian scrap yards buy old tonnage from owners in dollars, but sell the scrap metal to steel mills in rupees”

India-Rupee Slump Seen by Broker ACM as Brake on Ship Demolition

A plunge in the Indian rupee to near a record is curbing demolition of obsolete merchant vessels, exacerbating a fleet surplus in the maritime industry, according to London-based shipbroker ACM Shipping Group Plc. “Indian scrap yards buy old tonnage from owners in dollars, but sell the scrap metal to steel mills in rupees,” ACM senior analyst Marc Pauchet said in a report sent by e-mail today. “Mills are finding it increasingly difficult to meet the prices demanded by recyclers.” The currency of the world’s largest vessel-scrapping nation fell 1 percent to 60.24 per dollar as of 3:12 p.m. in Mumbai today, according to prices compiled by Bloomberg. That’s 0.8 percent away from its record low of 60.765 per dollar on June 26. The shortfall in India’s current account, the broadest measure of trade, widened to a record 4.8 percent of gross domestic product in the year ended March 31, official data show. Ship owners are contending with a fleet surplus across the maritime industry that Clarkson Plc (CKN), largest shipbroker, estimated in March was the largest since the early-1980s. The Baltic Dry Index, an overall measure of commodity freight costs, averaged 847 points this year, its worst start on record, according to the Baltic Exchange in London.

To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net

Cash crunch has shown that financial policy in China is not reliable

July 2, 2013 3:17 pm

Pity the banks after Beijing’s blunt move

By Simon Rabinovitch in Shanghai

Cash crunch has shown that financial policy in China is not reliable

It is unfashionable these days to take the side of banks, especially institutions that are mollycoddled by the state. China’s government-owned banking behemoths are among the most unlikely candidates for compassion. But they deserve more than a little sympathy after the cash crunch of the past three weeks. Read more of this post

S. Korea’s household debts still face fragile structures

S. Korea’s household debts still face fragile structures

English.news.cn   2013-07-03

SEOUL, July 3 (Xinhua) — Growth of household debts in South Korea continued to slow amid efforts to contain further rise, but its debt structure remained fragile due to heavy dependence on high-rate loans, excessive debts compared with debt-servicing capabilities and growing multiple borrowers, data from related authorities showed Wednesday. The country’s household debts reduced 2.2 trillion won from three months earlier to 961.6 trillion won (843 billion U.S. dollars) as of end-March, the first decline in four years, according to reports submitted to lawmakers by the Ministry of Strategy and Finance, Bank of Korea (BOK), the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). Read more of this post

The Revolving Door of Chinese Politics: A look at how ambitious executives at China’s major state-owned enterprises hope to be transferred to government posts

The Revolving Door of Chinese Politics – Economic Observer Online

By Shen Nianzu (沈念祖)
Issue 626, July 1, 2013
This is an extended abstract of an article that appeared in this week’s edition of The Economic Observer, for more highlights from the EO print edition, click here.
It’s already been 100 days since a new generation of officials have taken up their posts in the country’s State Council. Many of the newly appointed politicians formerly served at executives at some of China’s major state-owned enterprises (SOE).
For example Guo Shengkun (郭声琨), who was recently appointed as Minister of Public Security and also as one of China’s five State Councilors, once served at the CEO and Chairman of Aluminum Corporation of China (Chinalco or 中国铝业公司). Read more of this post

Zong Qinghou built Hangzhou Wahaha Group into a beverage giant, and now he has his sights set on conquering the retail sector

07.03.2013 13:53

Time for a Transformation

Zong Qinghou built Hangzhou Wahaha Group into a beverage giant, and now he has his sights set on conquering the retail sector

By staff reporters Shen Hu, Zhou Qun and intern reporter Wu Yijing

(Hangzhou) — With nearly 70 billion yuan in personal assets, Zong Qinghou, founder and chairman of Hangzhou Wahaha Group Co., is China’s richest man and a talented salesman. Starting his business career by selling cold drinks and ice cream on a bicycle at age 42, Zong created Wahaha in 1989 and made the company the country’s largest beverage producer. Zong is well known for his toughness in business negotiations. In a dispute between Wahaha and its French partner, Groupe Danone, over branding issues several years ago, he mobilized resources in political, social, business and judicial arenas to win the argument. And yet he always says: “My wealth is accumulated by selling bottles of water.” Read more of this post

Listed Chinese firms invest in wealth management products

Listed Chinese firms invest in wealth management products

Staff Reporter

2013-07-03

Amid the credit crunch, many Chinese banks have rolled out wealth management products with high yields, which have attracted numerous investors, including listed firms with idle funds in hand.

According to Industrial Securities, in the third week of June the yield rate of one-month renminbi-denominated wealth management products issued by major banks has risen further to 5.06% per annum, while the rate of four and nine-month products issued by banks limited by shares hit 5.67% and 6.2%, respectively. Read more of this post

Risks of a hard landing for China; Beijing might need to do what its leaders neither want nor expect

July 2, 2013 7:12 pm

Risks of a hard landing for China

By Martin Wolf

Beijing might need to do what its leaders neither want nor expect

The new Chinese leadership is trying to manage one of the most difficult of economic manoeuvres: slowing down a flying economy. Recently, difficulties have become more apparent, with the attempt of the authorities to bring “shadow banking” under control. Yet this is part of a bigger picture: the risk that a slowing economy might even crash. Indeed, the expressed desire of China’s new government to rely on market mechanisms raises the risks. Read more of this post

For Pension Funds, Higher Fees Don’t Mean Higher Returns, Study Finds

July 2, 2013, 11:01 a.m. ET

For Pension Funds, Higher Fees Don’t Mean Higher Returns, Study Finds

Report on State Pension Funds Adds Fuel to Debate on Active Investment Managers

MICHAEL CORKERY

Public-employee pension plans paying the highest investment fees aren’t generating the highest returns, according to a new study by a pair of Maryland think tanks. In fact, just the opposite may be true, says the Maryland Public Policy Institute and Maryland Tax Education Foundation. On average, 10 states paying the most money-management fees had lower investment returns between June 30, 2007 and June 30, 2012 than 10 states paying the fewest fees.

Read more of this post

A Dizzying Condo Market: Toronto’s effort to create a livable city through densely populated neighborhoods is a roaring success, but to what end?

July 2, 2013

A Dizzying Condo Market

By IAN AUSTEN

TORONTO — Sandwiched between two rail lines in this city’s core, great factories once produced the finest Canada could offer the world: Magic baking powder, Brunswick bowling alley flooring and Massey Ferguson farm equipment.

Those factories and many others here have been long abandoned or demolished, but the area is bustling. It is now called Liberty Village and it is packed with high-rise condominiums, largely built over the last five years, with many more still under construction. Read more of this post

Worries of crash persist in Toronto’s condo alley

Worries of crash persist in Toronto’s condo alley

Ian Austen, The New York Times | 13/07/03 8:20 AM ET
Sandwiched between two rail lines in Toronto’s core, great factories once produced the finest Canada could offer the world: Magic baking powder, Brunswick bowling alley flooring and Massey Ferguson farm equipment.

What once was a no-brainer decision, locking in your mortgage rate for five years or even 10 years, now has a question mark attached to it. Read more

Those factories and many others here have been long abandoned or demolished, but the area is bustling. It is now called Liberty Village and it is packed with high-rise condominiums, largely built over the last five years, with many more still under construction. Read more of this post

Zhou Pulling China Punch Bowl Set to Shape Legacy as PBOC Chief

Zhou Pulling China Punch Bowl Set to Shape Legacy as PBOC Chief

Zhou Xiaochuan earned distinction as the G-20’s longest-serving central bank chief helping keep China out of a financial crisis the past decade. In the wake of June’s record liquidity squeeze, his legacy hangs in the balance.

Zhou and his colleagues at the People’s Bank of China left investors, bankers and market participants in the dark for four days after the overnight lending rate between banks hit a record 11.7 percent June 20 before releasing a week-old statement as the central bank’s first word on its objectives. Zhou himself kept mum until he reiterated a pledge to maintain market stability on June 28. Read more of this post

Tiger Moms Crave Diapers From Japan; Kao has a 30% market share in Japan compared with Unicharm’s 34%

July 3, 2013, 12:07 PM

Tiger Moms Crave Diapers From Japan

By Mayumi Negishi

Japan’s second-largest diaper maker is apparently struggling to meet surging demand from Tiger Moms.

Kao Corp.’s breathable Merries diapers have gained a reputation abroad for being good for a baby’s development, appealing to mothers who want to maximize the head start they give their children, Kao Chairman Motoki Ozaki said in a recent interview. Read more of this post

U.S. Prepares to Place Stricter Rules on 8 Biggest Banks

U.S. Prepares to Place Stricter Rules on 8 Biggest Banks

JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Goldman Sachs Group Inc. are among eight U.S. banks facing a new round of domestic rules on capital and debt that would be even stricter than global standards approved today.

Regulators will push banks to maintain a leverage ratio of capital to assets that exceeds the 3 percent minimum set by the Basel Committee on Banking Supervision, Federal Reserve Governor Daniel Tarullo said today, and the Federal Deposit Insurance Corp. said a proposal may be published next week. Another measure “in the next few months” would compel banks to hold a set amount of equity and long-term debt to help regulators dismantle failing lenders, Tarullo said. Read more of this post

Tata to Ambani Vie for First India Bank Permits in a Decade

Tata to Ambani Vie for First India Bank Permits in a Decade

Tata Sons Ltd., which manages India’s biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among 26 seeking the country’s first new banking licenses in more than a decade.

The companies yesterday met the Reserve Bank of India’s deadline to apply for the permits, it said in a statement published on its website. Read more of this post

Junk-Loan Rates Soar on Record 43% on Debt as Buyers Balk; Investors are demanding more in interest to fund the $550 billion market for leveraged loans

Junk-Loan Rates Soar on Record 43% on Debt as Buyers Balk

Junk-rated companies agreed to boost interest rates on more U.S. loans than any time since at least 2011, as lenders extracted more compensation with prices of the floating-rate debt tumbling from a six-year high.

Drug distributor Valeant Pharmaceuticals International Inc. (VRX) to toothbrush-maker Water Pik Inc. were among companies that sweetened terms on $17.7 billion of loans in June, accounting for 43 percent of total deals, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data. That’s 10 times greater than in May and the highest in data going back to January 2011. Twenty issuers failed to get loan financing, versus 22 for the first five months of the year, as the average price of the senior-ranking debt fell by the most since May 2012. Read more of this post

How Student Loans Subsidized the American Dream

How Student Loans Subsidized the American Dream

On July 1, the rate of a subsidized Stafford student loan doubled to 6.8 percent from 3.4 percent, after Congress shut down for the Independence Day holiday without taking action to prevent a scheduled increase. If lawmakers fail to reach a retroactive agreement before the August recess, the average Stafford borrower will have to pay back about $800 more than under the previous rate for every year of loans. Read more of this post

Cornell University Awash in Debt Chases Donors in ‘Pay-as-You-Go’ Expansion

Cornell Awash in Debt Chases Donors in ‘Pay-as-You-Go’ Expansion

David Skorton’s appointment as president of Cornell University seven years ago ushered in a $4 billion fundraising campaign, the school’s largest ever and first in more than a decade.

Skorton has since increased the goal to $4.75 billion and extended it four years to 2015. Now he’s preparing to kick-start a second effort to finance a $2 billion technology campus as the upstate New York Ivy League school expands on Roosevelt Island in Manhattan. Read more of this post

Numbers Go Missing From China Factory Report Without Explanation; China No Longer Making Up Numbers, Now Simply Deleting Them

China No Longer Making Up Numbers, Now Simply Deleting Them

Tyler Durden on 07/02/2013 08:18 -0400

For many years, the Chinese politburo (not to be confused with the US Department of Labor) had a simple solution to accusations that central planning doesn’t work: just make up the economic numbers. However, a few months ago China found itself in hot water when it became impossible to pretend its manipulated numbers were even remotely credible, driven by a massive discrepancy between China exports to Hong Kong and HK imports from China. The immediate result by China, and the PBOC, as it attempted to regain some credibility was an drastic and epic move to force capital reallocation, in the process nearly wiping out its banking sector when interbank lending rates exploded to over 25%. For now, China appears to have regained some control even if the ensuing CNY1 trillion deleveraging that is imminent is sure to lead to unprecedented pain for the country that is more addicted to credit creation than any other. But in the meantime, China has once again fallen bank to doing what it does best: manipulating economic data, in this case the recently announced PMI. Only this time there is a twist: instead of goalseeking reported data to comply with some artificial reality that Beijing approves of, now China is simply flat out refusing to report numbers, period!

Numbers Go Missing From China Factory Report Without Explanation

By Bloomberg News – Jul 1, 2013

An official report on China’s manufacturing in June omitted numbers for export orders, imports and inventories of finished goods, without any explanation for the gaps. Five of 12 sub-indexes usually released with the Purchasing Managers’ Index were absent from today’s releases from the National Bureau of Statistics and the China Federation of Logistics and Purchasing. The others were for backlogs of work and quantities of purchases. The statistics bureau didn’t immediately respond to e-mailed questions asking for comment. Read more of this post