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LDK Delinquency Flags Chance of Another Solar Bust: China Credit

LDK Delinquency Flags Chance of Another Solar Bust: China Credit

LDK Solar Ltd. (LDK)’s failure to fully pay notes this week has raised the prospect of China’s second solar-industry failure this year as the company needs to repay a loan 10 times larger by June.

The world’s second-biggest maker of wafers that convert sunlight into power couldn’t repay all of the $23.8 million of dollar-denominated convertible bonds that matured on April 15, according to a company statement yesterday. Before the delinquency, its 2014 yuan notes dropped below 50 yuan per 100 yuan face value, according to data compiled by Bloomberg. The yield reached a six-month high of 125 percent last week, compared with the 79 percent for Bonn-based Solarworld AG. (SWV)

LDK, which will probably report a second year of losses tomorrow, must repay a $240 million loan unless it spins off its polysilicon unit by June 3, according to regulatory filings. Suntech Power Holdings Co. (STP), once the world’s largest panel maker, was dragged into insolvency days after it defaulted on a $541 million bond repayment on March 15.

LDK failed to repay about $7 million of bonds for which it could not reach a settlement, and may receive a notice of default, said Edward Guinness, a fund manager at Guinness Atkinson Funds in London who oversees about $800 million, including a “tiny” position in LDK.

“It’s out of LDK’s hands,” he said in an interview yesterday. “The lenders can choose to give them an extension. It’s up to them to push LDK into bankruptcy.” Read more of this post

If Gold < $1175, Then Cyprus Out Of Eurozone?

If Gold < $1175, Then Cyprus Out Of Eurozone?

Tyler Durden on 04/16/2013 12:16 -0400

One of the unexpected consequences of the recent plunge in the price of gold (for whatever reason, and there are many proposed explanations for why gold has tumbled, none of them completely accurate or comprehensive) is that when the European Commission set the precedent with the forced sale of Cypriot sale for a total of €400 million “to cover ELA losses” as Mario Draghi dictated to the aptly named head of the Cyprus Central Bank, Panicos, he set a line in the sand especially when it comes to German expectations. Because while the size of the Cypriot bailout will likely keep expanding, the one fixed component is the €10 billion loan that Merkel has still to get approval for in parliament. This number is set in stone, and any additional bailout “funding” will have to come from either further depositor impairment (until eventually even the insured depositors become impaired, again) or as the case may be, the country is forced to sell all of its sovereign hard assets, like its gold. Which means that no matter what, Cyprus will have to sell enough gold to cover a €400MM shortfall, as point 29 of the Debt Sustainability Analysis demanded.

And therein lies the rub.

While a week ago, when gold was $1600/ounce the self-funded component (read “gold sale”) of the Cypriot bailout amounted to just over 10 tons of gold, as of today’s price and EURUSD rate, Cyprus would now have to sell 12 tons of gold to cover the gap, if it were to hit the sell button today (assuming a price of $1385/ounce and a 1.315 EURUSD exchange rate). As far as we know, Cyprus hasn’t sold one ounce yet. But what if gold keeps tumbling as it has in the past three days? Well, the problem as most know, is that as of March based on IMF data, Cyprus only has 13.9 metric tons of “excess” (as the EC defined it) gold.

This means one can extrapolate below what price Cyrpus is out of luck and the proposed European Commission bailout fails as one of the key self-funded elements simply will not have enough cash to fill the €400 MM hold.  That price for gold, once again assuming a 1.315 EURUSD, is roughly $1175/ounce. Read more of this post

Since Friday morning, the value of total above-ground stocks of gold bullion has fallen by more than $1 trillion, “could fall to $1,050”

Gold loses $1 trillion of total global value, “could fall to $1,050”

BY BEN TRAYNOR

April 16, 2013 • Reprints

Spot market gold prices fell to a fresh two-year low in Tuesday’s Asian trading, dropping to $1,322 per ounce, before rallying back above $1,386, as stock markets extended yesterday’s losses.

Silver dropped to its lowest level since September 2010 at $22.10 an ounce before it too recovered some ground. Oil was down on the day by lunchtime in London, while copper ticked slightly higher.

Since Friday morning, the value of total above-ground stocks of gold bullion, estimated by metals consultancy Thomson Reuters GFMS at around 174,000 tonnes, has fallen by more than $1 trillion. Read more of this post

Pension Funds Ignoring Kim Buy Cheapest Korea Stocks Since 2007

Pension Funds Ignoring Kim Buy Cheapest Korea Stocks Since 2007

South Korea’s biggest investors are buying more equities than ever at a time of worsening relations with North Korea, lured by the cheapest shares since 2007.

Domestic institutions bought a net 2.2 trillion won ($1.97 billion) of stocks in the two weeks after North Korea announced its highest combat level on March 26, the first among escalating threats from Kim Jong Un’s regime. The purchases were larger than those following seven previous flare-ups, from North Korea’s first nuclear test in 2006 to its detonation of a nuclear device in February, data compiled by Bloomberg show.

While the Kospi index has retreated 3.1 percent since March 26 amid 2.2 trillion won of net equity sales by foreigners, Korea Teachers Pension and Shinyoung Asset Management Co. added to holdings as valuations fell to the lowest level in six years relative to MSCI Inc.’s Asia Pacific Index. Investors who bought Kospi shares in the two weeks after previous bouts of tension were rewarded with three-month gains of 5 percent on average.

“There’s ample upside in the Kospi this year from the current level,” Young Soo Shim, the head of asset outsourcing team at Korea Teachers Pension, the nation’s second-largest public pension fund with the equivalent of $12.5 billion under management, said by phone on April 12. “We spent more than initially planned in March as we have flexibility in executing money, with North Korea continuing to ratchet up threats.” Read more of this post

Malaysian Poll Upset Would Pose Risk to Tycoons: Southeast Asia

Malaysian Poll Upset Would Pose Risk to Tycoons: Southeast Asia

Malaysian companies controlled by billionaires T. Ananda Krishnan and Syed Mokhtar Al-Bukhary face the risk of increased competition and government scrutiny should opposition parties win next month’s election.

Anwar Ibrahim’s three-party Pakatan Rakyat, or People’s Alliance, pledged in its manifesto to abolish monopolies in industries including pay television, which is dominated by Ananda’s Astro Malaysia Holdings Bhd. (ASTRO) Anwar said in a March 8 interview he will scrutinize government agreements made with Syed Mokhtar, whose DRB-Hicom Bhd. (DRB) bought a 32 percent stake in the national postal service in 2011.

Astro and DRB shares have fallen at least 5 percent this year, compared with the FTSE Bursa Malaysia KLCI Index (FBMKLCI)’s 0.7 percent gain. Polls show Pakatan Rakyat is poised to wrest more seats from Prime Minister Najib Razak’s Barisan Nasional coalition in elections due on May 5. Najib’s approval rating slipped in February to the lowest level in 18 months, according to a survey by the Merdeka Center for Opinion Research.

“Things seem to be shaping up to be a fairly close election,” Rahul Bajoria, regional economist for Asia at Barclays Plc, said by phone from Singapore on April 12. “There is some market concern generally that the PR coalition has indicated that they will be reviewing contracts.”

The opposition holds 75 seats in the 222-seat parliament, while Najib’s Barisan has 137 seats, according to data on the parliamentary website. Either side needs at least 112 seats to form a government. Barisan currently holds power by the slimmest margin since Malaysia’s independence from the British in 1957. Read more of this post

China slowdown shows struggle to channel money into real economy; Components of off-balance sheet financing soared

Analysis: China slowdown shows struggle to channel money into real economy

9:44am EDT

By Kevin Yao

BEIJING (Reuters) – A credit boom in China failed to keep economic recovery on track in the first quarter, suggesting the cash sloshing around the economy is not yielding the desired effect of stoking growth and could instead exacerbate property and inflationary risks.

A rapid rise in credit in recent months has been driven by the fast-growing shadow banking sector rather than formal bank lending, raising two major concerns.

One is that some of the new money is being used by debt-laden local governments to repay existing loans rather than being channeled into investment that might spur fresh economic activity.

The second is shadow banking has provided a lifeline to funding investment in the property sector, one area where the government is trying to restrict growth for fear that a house price boom could undermine the broader economy. Read more of this post

Counterfeit goods, mainly from China, have become as profitable for Asia’s criminal gangs as illegal drug trafficking, the United Nations said

April 16, 2013, 1:58 a.m. ET

Fake Goods Rival Drug Profits for Asia’s Criminals

By CAROLINE HENSHAW

SYDNEY—Counterfeit goods, mainly from China, have become as profitable for Asia’s criminal gangs as illegal drug trafficking, the United Nations said in a report published Tuesday.

The U.N.’s Office on Drugs and Crime, or UNODC, looked into international organized crime across much of the Asia-Pacific region. Its report, the first ever published by the agency on the topic, catalogues how rapid economic growth has led to the proliferation of criminal networks profiting from illegal trade in goods and people.

A surge in Asia’s exports, which have nearly quadrupled in the past decade or so to $5 trillion, according to the World Trade Organization, has been accompanied by a rise in the trafficking of fake-branded products including handbags and medicines, the U.N. report found. Read more of this post

Chinese billionaires nervous about BVI revelations exposed by journalists

Chinese billionaires nervous about BVI revelations: report

Staff Reporter, 2013-04-16

An in-depth report on global tax havens has made many wealthy individuals across the globe anxious due to the increasing possibility that their overseas fortunes will be exposed by journalists, reports the Guangzhou-based 21st Century Business Herald.

Reports by the International Consortium of Investigative Journalists said hundreds of thousands of billionaires around the world, including many from China, have hidden their wealth in territories like the Cayman Islands and British Virgin Islands to dodge taxes. While this is hardly a new revelation, the prospect that individuals could be named publicly has caused consternation among those who fear their financial affairs might come under investigation. Read more of this post

Beijing defends ‘new look’ SOEs

April 15, 2013 1:43 pm

Beijing defends ‘new look’ SOEs

By Simon Rabinovitch in Beijing

The voice of the Communist party has defended the role of the state in China’s corporate sector, saying that government-owned companies are competitive on the global stage and paying important dividends to the country.

In a front-page article about the “new look” of state-owned enterprises, the People’s Daily said they were the backbone of the Chinese economy and stronger than at any point in the past two decades. Read more of this post

China’s banking regulator has banned the country’s lenders from creating new loans via local government financing vehicles (LGFV) as it tries to rein in ballooning risks with rising defaults

China Regulator Bans Lenders From Creating New LGFV Loans

04-15 16:26 Caijing

“For LGFVs with a lower-than-100 percent cash flow coverage ratio or higher-than-80 percent debt-to-assets ratio, their loans as a share of total bank lending should not be higher than that in the previous year”

China’s banking regulator has banned the country’s lenders from creating new loans via local government financing vehicles (LGFV) as it tries to rein in ballooning risks with rising defaults. Banks should control loans to LGFVs and must not increase its size, according to a guideline issued by the China Banking Regulation Commission. “For LGFVs with a lower-than-100 percent cash flow coverage ratio or higher-than-80 percent debt-to-assets ratio, their loans as a share of total bank lending should not be higher than that in the previous year,” the CBRC said. The CBRC has also reiterated banks should take a “cautious” approach in holding bonds from LGFVs, and bar local governments from using public assets as loan guarantees on behalf of their financing vehicles. Most Chinese local governments are forbidden from borrowing money directly. Some have set up special financial vehicles to help get round such restrictions and provide funding for costly infrastructure projects which usually take years to generate returns. Read more of this post

Slower China Growth Signals Days of Miracles Are Waning; Prices for knife fish, a delicacy, have fallen to $13 each from $220

Updated April 15, 2013, 10:11 p.m. ET

Slower China Growth Signals Days of Miracles Are Waning

By JAMES T. AREDDY and TOM ORLIK

Shanghai property developer Sun Ping recalled offering a bloc of villas for sale in 2006, a time when buyers queued overnight and traded spots in line for money. He sold 62 houses in three hours and figures those homeowners quickly saw their investments triple in value.

“That was a miraculous time,” Mr. Sun said. A recent open house he hosted drew only a handful of shoppers.

The days of miracles appear to be over in China, the world’s second largest economy. A cleanup is under way, following an economic party of epic proportions that lifted incomes but left behind debt, corruption and a mess of the environment.

After three decades of annual economic growth averaging around 10%, many industries are experiencing less bling and more blah. Read more of this post

China’s Cities Drag Feet on Home-Price Curbs: Mortgages

China’s Cities Drag Feet on Home-Price Curbs: Mortgages

All real estate markets are local, says the industry axiom, one that China’s central government is painfully aware of as its efforts to rein in home prices are undermined by uncooperative municipal authorities.

Former Premier Wen Jiabao, in his final endeavor to make housing affordable, set an April 1 deadline for higher down payments and interest rates for second-home loans in cities with “excessively fast” price gains and ordered stricter enforcement of taxes on sales. Thirty-five provincial-level cities responded with measures insufficient to curb prices that climbed 150 percent from 2003 to 2012.

“The local governments are just making a gesture to show they are following the orders,” said Ding Shuang, a senior China economist with Citigroup Inc. in Hong Kong. “Some of the targets are almost like jokes. The government’s enforcement of policies will be compromised.” Read more of this post

Paulson Gold Bet Loses Almost $1 Billion; Paulson started the year with about $9.5 billion invested across his hedge funds, of which 85 percent was in gold share classes.

Paulson Gold Bet Loses Almost $1 Billion: Chart of Day

Hedge-fund manager John Paulson’s wager on gold wiped out almost $1 billion of his personal wealth in the last two trading days as the precious metal plummeted 13 percent.

The CHART OF THE DAY shows gold’s tumble since the start of the year has cut his riches by $1.52 billion on paper, including about $973 million in the rout that began on April 12 and continued with today’s 9.3 percent drop. Paulson started the year with about $9.5 billion invested across his hedge funds, of which 85 percent was in gold share classes. Read more of this post

Does China Really Want a Nuclear Japan and South Korea? The potential for an atomic arms race in East Asia is real. Beijing must realize this

April 15, 2013, 7:28 p.m. ET

Does China Really Want a Nuclear Japan and South Korea?

The potential for an atomic arms race in East Asia is real. Beijing must realize this.

By BOB CORKER

North Korea’s increased belligerence has alarmed the U.S. and its allies and heightened tensions in the Asian-Pacific region. As usual, though, the hand-wringing in Washington, Tokyo, Beijing and Seoul isn’t accompanied by any new ideas on what to do to solve the perennial problem of Pyongyang and its illicit nuclear weapons program.

Most problematic, perhaps, is that nothing has altered the strategic calculus of China—the most influential player with respect to North Korea, and the one without which it is hard to see a resolution. Read more of this post