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I think that this is completely explained by the wealth effects of QE. The pullback in spending coincided nearly exactly with the market pullback in January. A reversal and uptick in spending when the february numbers come out would reinforce that opinion.
“We doubt that the financial system in China will experience a liquidity crunch immediately because of this default but we think the chain reaction will probably start,” Hong Kong-based strategists David Cui, Tracy Tian and Katherine Tai wrote in a note yesterday. During the U.S. financial crisis, it took a year “to reach the Lehman stage” when investors began to panic and shadow banking froze, the strategists added.
Chaori’s default has no “systemic implications” even as more failures may follow “in line with normal cyclical volatility,” analysts including Kenneth Ho at Goldman Sachs Group Inc. wrote in a March 8 report.
"It's just like when you find a dead roach in your kitchen. You would know there must be more to come," said Huang Cendong, an analyst at Sinolink Securities Co., a Chinese brokerage firm.
the housing bubble burst started with the failure of 2 small bear stearns hedge funds. we're all left to wonder whether this failure is a similar harbinger of things to come, or if the pboc et al come to the rescue and start pumping harder once again.
the housing bubble burst started with the failure of 2 small bear stearns hedge funds. we're all left to wonder whether this failure is a similar harbinger of things to come, or if the pboc et al come to the rescue and start pumping harder once again.
You all probably saw this already, but just in case:
The nation in late January averted its first trust default in at least a decade as investors in a 3 billion-yuan high-yield product issued by China Credit Trust Co. were bailed out days before it matured.
Last edited by Slimprofits; March 11, 2014, 07:45 PM.
Reason: formatting
Baoding Tianwei Baobian Electric Co. (600550)’s bonds and stock were suspended from trading today after the Chinese electrical equipment maker said it reported losses for a second year running.
The company, which also makes solar panels and is based in the northeast province of Hebei, reported a net loss of 5.23 billion yuan ($852 million) in 2013 versus a 1.55 billion yuan earnings deficit a year ago, according to a statement to the Shanghai stock exchange yesterday. The exchange, in line with its rules, will decide in seven trading days whether to continue the trading halt on Tianwei Baobian Electric’s bonds until its losses are reversed.
The yield on Tianwei Baobian Electric’s 1.6 billion yuan of 5.75 percent bonds due 2018 has soared 537 basis points over the past year to 11.13 percent as of yesterday, according to exchange data. Its stock has fallen 37 percent.
Baoding Tianwei Group, a central-government owned company and Tianwei Baobian Electric’s controlling shareholder, provided a full, unconditional and irreversible guarantee for the notes, according to the notes’ 2011 prospectus.
Last edited by Slimprofits; March 12, 2014, 03:54 AM.
More corporate bonds onshore may default this year, said Li Ning, an analyst in Shanghai at Haitong Securities Co. Companies with bonds that lack guarantees and have higher credit risks similar to the Chaori debt include Zhuhai Zhongfu Enterprise Co. (000659), Star Lake Bioscience Co. and Nanning Sugar Industry Co., Li said.
Calls to Zhuhai Zhongfu went unanswered yesterday and there was no immediate reply to e-mailed questions after normal office hours. An official at Star Lake declined to comment over the phone and didn’t immediately reply to e-mailed questions. An official in the securities department of Nanning Sugar said the company couldn’t answer questions before March 14 when the annual report is due.
The yield on the 2015 securities of Zhuhai Zhongfu, a beverage packaging manufacturer, has surged 234 basis points this week to a record 24 percent, according to exchange data. The rate on Nanning Sugar’s 2019 notes has jumped 27 basis points to 10.6 percent. It had a debt-equity ratio of 316 percent at the end of 2012.
Four companies pulled domestic bond sales on the Chaori news. Suining Chuanzhong Economic Technology Development Co. will delay a 1 billion yuan offering due to “serious fluctuations in the bond market,” it said on ChinaBond’s website March 5. Taizhou Kouan Shipbuilding Co., Xining Special Steel Group and Qunsheng Group Co. scrapped offerings for similar reasons.
From back on 2/13 and this time I checked to ensure that GRG hasn't already posted it:
Six Chinese trust firms have lent more than 5 billion yuan ($824.6 million) to a delinquent coal company, state media reported on Friday, raising the prospect of further defaults in China's so-called shadow banking system.
In addition, investors in a trust product already in default have pledged to seek repayment not only from the trust firm itself, but also from China Construction Bank (CCB) (601939.SS) (0939.HK), the country's second-largest lender, which acted as sales agent for the high-yield investment products issued by Jilin Province Trust Co Ltd.
The paper did not name the other trust companies that lent to Liansheng, but reported that six trust firms have 5 billion yuan in exposure, citing an unnamed source.
Can anybody tell me why Chinese interbank rates are falling on the widening credit crisis? AEP at UK Telegraph noted it today.
Interbank rates don't fall in a widening credit crisis.
did you forget PBOC? Central Bank backstops, guarantees etc.
remember the crisis of 2008, Libor spiked, but was quickly brought under control by the Fed lowering rates, guranteeing deposits, and assuring the market that it would "lend" (read create) money for junk
remember LIEbor
The institute filtered out 16 companies that would have problems repaying their investors soon. These include Ruitai Materials Technology Co Ltd and Leshan Electric Power Co, which lack cash to repay investors of bonds that mature in the second half of this year.
Most of the financial figures are based on data from end-September last year. The exceptions are that of Fiyta Holdings Ltd and Leshan Electric Power Co, for which data is as at Dec 31 last year.
Ruitai, a Shenzhen-listed maker of fused cast refractories, has a 200 million yuan bond that is maturing in August this year, but has cash of only 150 million yuan. Its net debt is 1.21 billion yuan.
Similarly, Shanghai-listed Leshan - which generates and distributes hydroelectric power - has a 200 million yuan bond due in October, but its cash position stands at 82 million yuan. It has net debt of 1.63 billion yuan.
Others may miss their coupon payments. Paper product manufacturer MCC Meili Paper Industry Co Ltd has a 37.8 million yuan coupon payment due in September, but the company reported just three million yuan of cash.
Chaori - which has until April 7 to pay its investors under a 30-day grace period - is unlikely to meet the deadline since it has less than 60 million yuan of cash, RMI noted.
While Hangzhou Iron & Steel Co, and Xinjiang Ba Yi Iron & Steel Co Ltd are two cash-strapped companies with bonds also maturing in the third quarter, RMI noted that these firms have a direct government owner, which means that they may get some form of bailout.
These 16 companies, which include Chaori, are paying out coupons at the rate of between 4.55 per cent and 8.98 per cent. RMI screened the companies using a measure known as their probability of default (PD). These 16 firms made up the worst 5 per cent of PDs of all Chinese corporations that were assessed.
Beijing’s challenge is laid bare by the failure of Haixin Steel, a privately owned medium-sized mill in the heart of China’s coal country, to repay loans that came due last week. The default, disclosed to the Financial Times by steel traders, could send shockwaves through the local banking and shadow banking sectors.
Haixin is the largest privately owned steel mill in Shanxi and accounts for 60 per cent of the tax revenues in Wenxi County, home to 400,000 people in China’s coal heartland.
Haixin was also the lead investor, together with other local private companies, in Jinshang Investment Guarantee, which backed other companies’ debts for a fee. On Thursday, a website describing the credit guarantee company’s operations appeared to have been shut down.
China’s four-biggest lenders, which reported $126 billion of earnings in the 12 months through September, sank to the lowest valuations on record in Hong Kong trading yesterday.
The Big Four banks, all based in Beijing, tumbled an average 15 percent in Hong Kong this year through yesterday, led by an 18 percent retreat in AgBank.
I think Glencore the international physical commodity trading firm is in serious trouble. They have $55 billion dollars in debt with declining commodity prices associated with China and I bet they are tied to some of the defaults by commodity firms in China as well.
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