China Shadow Banking Giant Alarms Investors With Missed Payments
One of China’s largest private wealth managers is triggering fresh anxiety about the health of the country’s #shadowbanking industry after missing payments on multiple high-yield products. Zhongrong International Trust Co. missed payments on dozens of products and has no immediate plan to make clients whole, indicating troubles at the embattled Chinese shadow bank are deeper than previously known. Wang Qiang, board secretary of the firm partly owned by financial giant Zhongzhi Enterprise Group Co., told investors in a meeting earlier this week that the firm missed payments on a batch of products on Aug. 8, adding to delays on at least 10 others since late July, according to people familiar with the matter. At least 30 products are now overdue and Zhongrong also halted redemptions on some short-term instruments, one of the people said. Source: bloomberg
China's credit landscape under stress!
Ever since the shockwaves of the #CountryGarden upheaval, the Chinese credit landscape has been undergoing a seismic shift. The credit default swap (#CDS) market tells a compelling story - #China's 5-year CDS is on a relentless rise (+25bps), and the Markit iTraxx Asian ex Japan #InvestmentGrade index is soaring (+30bps). Foreign investors are strategically repositioning, swiftly #divesting their holdings in Chinese #assets, particularly on the domestic front. Can the #PBOC orchestrate the necessary #stimulus maneuvers to put an end to this spiral of uncertainty?
Japan GDP grew 6%, handily beating expectations on robust exports - but domestic demand disappoints
Japan Q2 GDP improves to 1.5% QoQ vs 0.8% expected and 0.1% prior, meaning Japan grows 6.0% on annualized basis, far more than expected (+2.9% yoy). However, some details of the report weren’t as impressive as the headline. As pointed out by analysts in CNBC report, nearly all of the increase in output was driven by a 1.8%-pts boost from net trade. That marked the second-largest contribution from net trade in the 28-year history of the current GDP series, with only the bounce back in exports from the first lockdown at the beginning of the pandemic providing a larger boost. Exports rebounded 3.2% from the previous quarter — largely driven by the spike in car shipments — while imports plunged 4.3% over the time period. Source: Bloomberg, HolgerZ, CNBC
CHINA: BIG MISSES ON MACRO DATA & SURPRISE RATE CUTS
China’s central bank unexpectedly cut key policy rates for the second time in three months on Tuesday, in a fresh sign that the authorities are ramping up monetary easing efforts to boost a sputtering economic recovery. This move opens the door to a potential cut in China’s lending benchmark loan prime rate (LPR) next week.Earlier this morning, China reported big data miss in July. Retail sales rose by 2.5% in July from a year ago, below expectations for a 4.5% increase, according to analysts polled by Reuters. A spokesperson for the National Bureau of Statistics said the bureau is suspending the youth unemployment number release due to economic and social changes, and is reassessing its methodology. Source: CNBC
President Joe Biden blasted China’s economic problems as a “ticking time bomb” and referred to Communist Party leaders as “bad folks”
His latest barb against President Xi Jinping’s government even as his administration seeks to improve overall ties with Beijing. In comments that included several major inaccuracies about the world’s second-largest economy, Biden said at a political fundraiser Thursday that China was in “trouble” because its growth has slowed and it had the “highest unemployment rate going.” He also blasted Xi’s signature Belt and Road Initiative as the “debt and noose,” because of the high levels of lending to developing economies associated with the global investment program. Although Biden misrepresented key statistics about China, overall outlook remains grim. This chart by Bloomberg thru Holger Z is a harsh remainder of the amount of leverage in the Chinese economy. As growth slows down alongside deflationary threat, this could become a major issue. Source: Bloomberg
Ominous sign of weakness in Chinese economy: China is suffering Italian style youth unemployment despite Chinese women retiring in early fifties
Source: Francois Trahan thru Michel ArouetT
Over the last few weeks, the newsflow for China assets has been horrendous, whether it’s the macro data or the policy side (disappointment at the scale and lack of detail)
While sentimnet on China is very bearish, Greater China stocks have outperformed over the past month. This could be a sign that the worst is behind and that bad news are already priced in. Source: J-C Gand, Bloomberg
Rice prices soared to the highest in almost 15 years in Asia on mounting concerns over global supplies as dry weather threatens production in Thailand and after top shipper India banned some exports
Concerns over the potential impacts of El Nino on production in some suppliers provided further underpinning to prices, as did rain-induced interruptions and quality variability in Vietnam’s ongoing summer-autumn harvest,” a FAO report stated. India, the world’s leading rice exporter, banned exports of non-basmati white rice on Jul. 20, as the government seeks to keep a cap on soaring food prices at home, and ensure there are enough supplies domestically “at reasonable prices.” Source: Bloomberg. CNBC
