China Banks

[freedom]

“US banks were crumbling while US companies, excluding the mortgage related ones and auto and airlines, were doing ok”

Please list some example? I only saw many many companies are cutting capex and employees. Many consumers lost their jobs and opted for lower quality stuff. Of course, the banking crisis lasted very short. From the bankruptcy of Lehman Brothers to TARP and subsequent multiple FED operations(before QE1), the time gap was too short to impact more business, e.g. the banks did not pull much business loans yet and the FED saved commercial paper market already. At the point of TARP, the banking crisis ended already. So US companies should thank the US government for saving them. Of course, many people will disagree, but that's the truth.

"USD is a reserve currency. " But borrowing in EURO can be repaid by USD barring currency swap and/or buying EURO using the USD? And why borrowing in USD could not be repaid in RUB? You mean there is no market to buy USD using RUB? I thought just how much RUB per USD, not can or can not?

"Bankruptcy can lead to liquidation. The operations does not continue. It is evident whenever there is crisis." That's unorderly bankruptcy organization. Of course, it could be that the business is making loss, then there is no point to continue. Even liquidating assets does not mean the business is gone. The asset could just go to another owner to continue the same business. e.g. a shipping company bankrupted and liquidated. The ships go to another owner and continue a shipping business.

[specuvestor]

US government did a good job. Thats what Buffett said and thats also my observation.

It was also common literature back then in GFC that the US consumer was over leveraged while the US corporates were not. And for sure they cut their capex when they did not know how the outlook was. It's not as if its the AFC that we can forget so easily

I am seriously confused whether u understand what is the competitive role and advantage of being a reserve currency, because in many of your posts seems to indicate u understood. You seriously think people will take rubles, real or peso for global trade settlement, or to receive them in lieu of USD?

OTOH people will take USD in lieu of non hard currency settlement anytime. It is asymmetrical

Which is why US tapering and looking to increase interest rate is a GLOBAL event not just a US event.

Ships can be scrapped. Economy slump affect businesses in multiple ways from suppliers to customers to price of assets. Even if u are late 20s u should have already witnessed the PIIGS unfold. How can output remains the same as if it is just some simple reorg

[freedom]

"I am seriously confused whether u understand what is the competitive role and advantage of being a reserve currency, because in many of your posts seems to indicate u understood. You seriously think people will take rubles, real or peso for global trade settlement, or to receive them in lieu of USD?

OTOH people will take USD in lieu of non hard currency settlement anytime. It is asymmetrical"

I call it horse feather. the strength of the currency depends on supply and demand as any other product/service. What it only proves US dollar has a stronger demand. Reserve currency or not, is only secondary to underlying supply and demand as the Yuan internationalization. Investors claim the Yuan internationalization like it is god-given. What a joke in the eyes of the economists! The truth about Petrodollar is that only US bought significant oil in the international market at that time and US only pays in USD.

Russia sells its oil and gas in USD and EURO, part of which has to be repatriated to Russia into Rubles for domestic tax and expense. There is always a market for Rubles and the market will decide how much Rubles equals a dollar or a EURO. When the oil and gas from Russia could not be easily sold in the international market or has to be sold cheaper, the Ruble demand will be low and so is the exchange rate. Somehow claiming the exchange rate of Russia Rubles without giving a rational behind, only proves to me that you only have some superficial knowledge about the economic and what's behind it.

"Ships can be scrapped. Economy slump affect businesses in multiple ways from suppliers to customers to price of assets. Even if u are late 20s u should have already witnessed the PIIGS unfold. How can output remains the same as if it is just some simple reorg "

another horse feather. A company with modern ships would scrap the ships because of bankruptcy? The ship will end where it is valued the most. If scrap value is the highest bid, scrap yard is where it belongs. However, I only see an oversupply situation since financial crisis with most of ship owning companies are under water. How many modern ships have gone to scrap yards? I am sure many people remember Enron, but how many know that EOG Resources was part of Enron and now is worth 40 some billion USD and one of the S&P 500 component(surprise, surprise). You spread some economic facts bluntly and claim that's the economics. To show your "deep" economic background, give the many examples that the bankruptcy destroyed the many profitable underlying business you claimed.

[specuvestor]

Demand and supply are created. It doesn't come naturally just as your job doesn't come naturally by some invisible hand. I will wait for the day when Rubles have a significant trading volume in global trade even when they are top5 global oil producer. Or for that matter OPEC currencies. Go ask if anyone or companies in Singapore's O&G sector if they interested to price invoices in Rubles... that would be the proof of the "horse feather" isn't it?

http://en.wikipedia.org/wiki/Feathering_(horse)

RMB OTOH will be a global trade currency and reserve, which is discussed in many threads. It doesn't come naturally as well and it is as invisible a hand as Maradona's hand of God.

Go read up more on Petro$ and meaning of hard currencies. LIBOR market was created around when US was peak oil production, and the shock that the US superpower is hostage to oil.

Modern ships are of course not scrapped... they are modified or simply refused delivery (what happened to the paperwork that some are so focused on?)... remember 2008 not too long ago when BDIY collapsed 90%? And we always talk about AGGREGATE supply. What happens when older fleet are scrapped? Why do u only concentrate on newbuilds? The average age of the global fleet (across different sectors) are roughly like 15-20 years.

Marginal changes in aggregates are most important to commodities or is that also superficial knowledge compared to your superior economist eyes focusing on "newbuilds"???

Since you are into US stocks... remember Kodak, Borders and Circuit City to name a few? EVEN IF parts of bankrupt entities closed and parts of them sold... can the AGGREGATE production remain the same?? If you are into stock indices you should know that past century Dow components all changed except one... how can u say businesses can continue as it is, come bankruptcy or not, all the more concerning bankruptcy of a major bank?

You're in one of your illogical textbook tirades again. I'm done and let the readers decide.

[freedom]

Still you have no idea what I am talking about Rubles. The demand for Rubles is not necessarily from the buyer of Russian oil & gas, but the seller of Russian oil & gas. It's Rosneft & Gazprom and alikes. Rubles does not have to be a reserve currency to have a stable exchange rate. It only requires a more stable supply and demand.

Horse feather, no one is talking about feathering. More like Pegasus. L.O.L. anyway, good one.

You have read too many fictions and regarded them as facts and theories. Neither RMB internationalization or Petrodollar is a god-given. It all has to have strong economic backing. I don't know how many investors have studied why China is executing yuan internationalization now(almost down time) more smoothly instead of the up time. It is mainly because China has the demand the world needs and the world has more supply then China demands. During the up time, though China has great demand, there is under supply. Look nowhere but iron ore trade. There will be more and more and more yuan-priced before any other country can replace the Chinese demand. Similarly, there will be more and more yuan-priced oil & gas contracts.

I don't concentrate on new builds, I uses new build as an example. There are still many 20-year-old ships all around. What I am trying to illustrate is that bankruptcy does not destroy profit. It liberates profitable enterprises from their troubled parents. A ship whether new build or 10 years old, as long as it is profitable to operate as a business, it will continue in the business, no matter the one owning it goes bankruptcy or not.

You want more examples? Fine, I can give you enough. Eastman Kodak, quote from wiki. The profitable subsidiary was carved out and is operated as an ongoing business, just like EOG resources, out of Enron.

In August 2012, Kodak announced the intention to sell its photographic film (excluding motion picture film), commercial scanners and kiosk operations as a measure to emerge from bankruptcy.[17] ...Kodak sold many of its patents for approximately $525,000,000 to a group of companies (including Apple, Google, Facebook, Amazon, Microsoft, Samsung, Adobe Systems and HTC) under the name Intellectual Ventures and RPX Corporation.[19]...Personalized Imaging and Document Imaging are now part of Kodak Alaris, a separate company owned by the U.K.-based Kodak Pension Plan.

For borders and circuit city, the good properties are sold to other more profitable retailers. What's the problem? The properties are not gone from the planet. The economic benefit continues without borders or circuit city.

Why has the aggregate production to be the same? If there is over production and unprofitable, the most sensible and economic solution is to remove the production. Of course, you have no knowledge of economics?

Bankruptcy itself, is just an economic term. Everyone can spill a few words about it, but many have no idea what's behind and why. Ever heard a popular phrase nowadays? vanilla mezzanine RMBS synthetic CDO? I bet most people could not grasp what it really means.

I have met and talked to many self-acclaimed economists, who can spill difficult-to-understand financial jargon, but have no idea how it runs. Most of the times, they forget to analyze econ 101 - supply and demand. L.O.L.

[specuvestor]

Horse feather, no one is talking about feathering. More like Pegasus. L.O.L. anyway, good one.

You have no idea the irony of this. I know exactly what u are trying to say using "horse feather" but you have no idea the satiric meaning when i put in the link. You presume a lot. It is a good summary of our difference here.

You probably dont get it why I said maradona's hand of God either. You cant see it does not mean it doesn't work that way

Exchange rate has nothing to do with with convertibility though it is a prerequisite. And it doesn't mean it can be used as medium of exchange in international trade either. Just ask your broker to take your rubles because it has an exchange rate. Good grief.

China is not the first country industrialised or manufacturing hub or only one with 1b population. It is about economic clout when it is gaining on US GDP. The elephant in the room dictates. Neither Russia nor OPEC is there in the world order. See the decline of mighty pound for your academic study.

The economic benefit of a carpark lot and circuit city are vastly different. As per your logic Motorola and Nokia folded into other hands have similar economic benefit. Hubris.

You can keep to your SS/DD curve just as those who swears on PE, without understanding the underlying dynamics. If only real life is so easy to just focus on one facet. Fine if you are a consultant or academia but dont try to do any real life business.

I amaze myself that i spend so much time in your virtual world

[greengiraffe]

China’s central bank again moves to ease lending costs
THE WALL STREET JOURNAL OCTOBER 15, 2014 8:27AM

CHINA’S central bank cut short-term borrowing costs for banks for the second time in less than a month, a sign that Beijing is under increased pressure to ease monetary conditions to combat a slowing economy.

Analysts say the reductions are likely to have only limited effect, so authorities could have to turn to more-powerful tools, such as lowering benchmark interest rates or reducing the proportion of deposits banks must hold as reserves at the central bank, if the economy deteriorates further.

A cut in the so-called reserve requirement would leave banks with more money to lend.

In a routine money-market operation, the People’s Bank of China cut the interest rate on 14-day repurchase agreements, a kind of short-term loan to commercial lenders, by 0.10 percentage points to 3.40 per cent yesterday. This followed a move on September 18 to lower the rate by 0.20 percentage points to 3.50 per cent.

“It shows that the central bank is under rather strong pressure to ease monetary policy as it seems like the government still considers financing costs in the economy too high,” said Gu Ying, interest-rate strategist at JPMorgan Chase.

The People’s Bank’s move came a week before China is scheduled to release major macroeconomic data for the third quarter and September. A survey of 15 economists by The Wall Street Journal indicates they believe China’s gross domestic product expanded 7.2 per cent in the latest quarter from a year earlier, slowing from a 7.5 per cent increase in the second quarter, as the pivotal real-estate sector remains depressed.

China is scheduled to release today inflation figures for September. Economists expect the figures to show a 1.7 per cent increase in the consumer-price index, slower than the 2 per cent rise in August, the poll indicates.

“While inflation may have come down, real interest rates remain elevated and the PBOC is clearly feeling the pressure,” said Mr Gu.

Although the latest repo-rate cut has raised hopes of broader monetary easing, the move came after a series of targeted, modest easing measures Beijing has deployed in recent months to help small businesses and public housing, Sue Trinh, a strategist with Royal Bank of Canada, wrote in a research note.

Analysts have said China has so far been reluctant to use more-powerful policy tools because lowering rates more broadly could prompt people and companies to take on more debt, adding to the risks the country’s financial institutions already face.

“The PBOC is indeed in a bind and is constantly balancing the need to protect growth against that to restructure the economy,” said Mr Gu, adding that if China’s economy keeps weakening, a policy-rate cut would likely be on the cards.

“Fine-tuning measures like cutting the repo rate mostly have a stronger effect on market sentiment. The spillover impact on the real economy is limited, because interest rates in China aren’t fully liberalised yet,” Mr Gu said.

[BlueKelah]

China just banned all new company bond approvals for corruption investigation. Many property developers gonna become insolvent

China’s NDRC Said to Suspend Company Bond Assents Amid Probe
China’s top economic planning agency is said to have suspended approvals this week for the sale of corporate bonds, deepening a crackdown on corruption and irregularities in the bond market.

It’s not clear when approvals will resume as the National Development and Reform Commission may issue stricter regulations for corporate bond sales, according to people familiar with the matter. They asked not to be identified because the suspension hasn’t been made public. The 21st Century Business Herald also reported the suspension yesterday.

At stake is a market that has helped finance more than $100 billion worth of corporate bonds in the first nine months of the year, according to data compiled by China Central Depository & Clearing Co. The NDRC’s move underlines the government’s unease over debt risks after a string of financial irregularities in bank lending, trust financing and bond issuance was exposed this year.

China has been tightening regulation of its interbank bond market since opening it to qualified foreign institutional investors in 2011. Sales on the interbank bond market are regulated by both the People’s Bank of China and the NDRC. It’s by far the biggest bond market in China, accounting more than 90 percent of all notes outstanding.

Credit concerns are escalating as property prices fall, state banks increase bad-loan provisions and at least 10 trusts have been struggling to meet payments since May. Five-year AAA corporate bond yields in China climbed to 5.1542 percent on Oct. 13, the highest since Sept. 23. They touched 6.3074 percent in January, the most on record.

Listed companies in China can sell bonds to refinance debt in a separate, smaller corporate market, called the exchange-traded market, which falls under the jurisdiction of the China Securities Regulatory Commission, the people said.

A former head of the NDRC’s fiscal and financial affairs department is being investigated in relation to corporate bond issuance dating back to 2005, Caixin magazine reported Aug. 13.

The Central Commission for Discipline Inspection of the Communist Party was investigating brokerages for possible bribery with a focus on bond underwriting, 21st Century Business Herald reported June 17.

Read More Here.

[greengiraffe]

Chinese bank lending picks up in September
AFP OCTOBER 16, 2014 7:00PM

China's banks stepped up their lending in September, but analysts say more monetary easing is needed to bolster the weakening economy.

Domestic banks extended 857.2 billion yuan ($A151.3 billion) in new loans, the People's Bank of China (PBoC) said in a statement on Thursday, up more than a fifth from the 702.5 billion yuan lent in August.

The September figure also beat a median forecast of 745 billion yuan from a Wall Street Journal poll of 15 economists.

Analysts attributed the rebound in new lending to China's "targeted" easing introduced earlier this year, which included cuts in reserve requirements for some banks.

Last month also saw the PBoC pump 500 billion yuan into the country's top five banks in a bid to boost lending to small businesses and kickstart the economy.

"New loans have recovered to the normal level, probably reflecting the ongoing targeted easing by the PBoC," ANZ economists Liu Ligang and Zhou Hao wrote in a research note.

But total social financing, a broader gauge of credit in the overall economy, remained "lukewarm", they said.

Social financing stood at 1.05 trillion yuan for September, the PBoC said, down from 1.4 trillion yuan for the same month a year ago.

"This suggested that the de-leveraging of shadow banking activity continues," ANZ said.

Authorities have sought to crack down on "shadow banking" - a huge network of lending outside formal channels and beyond the reach of regulators, including activities by online finance platforms, credit guarantee companies and microcredit firms.

Separately, the central bank also said China's foreign exchange reserves slipped to $US3.89 trillion ($A4.2 trillion) at the end of September, from $US3.99 trillion at the end of June.

China has the world's largest foreign exchange reserves, the bulk of which are believed to be held in US dollars.

[greengiraffe]

China's central bank to inject fresh stimulus
DOW JONES NEWSIRES OCTOBER 18, 2014 12:45AM

China's central bank is planning to inject up to 200 billion yuan ($US32.8 billion) into about 20 large national and regional banks, according to banking executives briefed on the matter, in another step aimed at spurring the world's second-largest economy.

The new funding for the joint-stock banks follows an injection of 500 billion yuan in funds into China's five major state-owned banks last month. It also comes amid growing worries that the government may miss its growth target -- set at 7.5 per cent this year -- for the first time since the Asian financial crisis in 1998.

Even so, the step falls short of a more sweeping effort, such as an interest-rate cut that some economists say is needed to lift the economy. Instead, the new infusion shows that Beijing is continuing to use targeted measures to counter the slowdown.

The People's Bank of China has informed the joint-stock banks such as Industrial Bank Co. and Guangfa Bank to submit applications for the funds in the form of three-month loans from the central bank, the banking executives said. Interest rates on the loans are expected to be similar to the low rates on the 500 billion yuan funds given to the five state-owned banks, they said.

The central bank is expected to guide the banks to channel credit into areas the government has deemed as important to the economy, such as public housing and private and small businesses, the executives said.

China so far has avoided launching a broad-based stimulus plan to rev up the economy for fears that a cut in interest rates or other broad easing measures might cause a flood in lending that would worsen China's debt problems and put the economy at greater risk. Lending ticked up last month, with the central bank reporting Thursday that Chinese banks issued 857.2 billion yuan ($US138.3 billion) of new yuan loans in September, up from 702.5 billion yuan in August, in what economists said is an attempt to re-energize the economy.

China's economic growth has already slowed to 7.5 per cent in the second quarter compared with a year ago and 7.4 per cent in the first quarter, an 18-month-low. Economists widely believe third-quarter data, to be released Tuesday, will show growth slowing to 7.2 per cent, according to a Wall Street Journal survey.