Bad loan writedowns soar at China banks - (www.ft.com) China’s biggest banks more than doubled the level of bad loans they wrote off last year, in a sign that financial strains are mounting as growth in the world’s second-largest economy slows. The five biggest Chinese banks, which account for more than half of all loans in the country, removed Rmb59bn ($9.5bn) from their books in debts that could not be collected, according to their 2013 results. That was up 127 per cent from 2012, and the highest since the banks were rescued from insolvency, recapitalised and publicly listed over the past decade. The sharp acceleration in write-offs is the latest indication of the turbulence now buffeting China’s financial system. The bond market suffered its first true default in March, two high-profile shadow bank investment products were spared from collapse by last-minute bailouts earlier this year, and a small rural lender suffered a brief bank run last week. Data also point to a deeper economic downturn in the first quarter than expected, putting China on track this year for its slowest growth since 1990. The deterioration has fuelled expectations that Beijing will act soon to shore up the economy. “Increasing downward pressure on the economy should not be neglected,” Li Keqiang, China’s premier, said last week. “We have policies in store to counter economic volatility.”
Biggest ETF Exodus From Treasuries Since ’10 Signals Higher Rate - (www.bloomberg.com) Investors of exchange-traded funds that buy U.S. government debt are signaling their conviction theFederal Reserve is intent on raising interest rates sooner rather than later. After pouring into the ETFs to start the year, investors pulled $10.3 billion in March, the biggest exodus since December 2010, data compiled by Bloomberg show. The $7.86 billion iShares 1-3 Year Treasury Bond ETF alone lost a third of its assets from withdrawals, the most of any fixed-income fund this month. The retreat shows how quickly ETF investors recalibrated expectations as Fed Chair Janet Yellensaid March 19 that a strengthening U.S. economy may prompt the central bank to lift its benchmark rate six months after it stops buying bonds. While Treasuries have confounded forecasters by outperforming this year, ETF investors are shifting money into riskier assets such as junk loans and small-cap stocks to capture greater returns. “When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” Thomas Higgins, global macro strategist at Standish Mellon Asset Management Co., which oversees $167 billion of fixed-income assets, said in a telephone interview from Boston. “With the Fed signaling rate hikes and the economy slowly but steadily humming along there is less and less value in Treasuries.”
Abe Bliss Broken as Foreigners Flee Topix in Biggest Drop - (www.bloomberg.com) In just one quarter, the developed world’s biggest stock rally has given way to its worst slump. Japan’s Topix index, up 51 percent last year, fell 8.9 percent this quarter through March 28, almost twice as much as the next-worst market, Hong Kong. The retreat is emboldening short sellers, whose trades made up as much as 36 percent of dailyTokyo Stock Exchange volume this month. Foreign investors sold 975 billion yen ($9.5 billion) of Japanese shares in one week in March, the most since the crash of 1987. While equities struggled around the world in the first quarter, declines were worse in Japan, where the euphoria created by Prime Minister Shinzo Abe and the central bank’s steps to beat deflation showed signs of wearing off. An appreciating yen and concern about tomorrow’s sales-tax increase punished shares more than the rest of the world at a time whenChina’s slowdown, Russia’s annexation of Crimea and worry that the U.S. will raise interest rates sooner than anticipated made gains harder to come by.
Dashed Ikea Dreams in Ukraine Show Decades Lost to Corruption - (www.bloomberg.com) Almost half of Ukrainians say they desire Ikea products more than any other global brand, yet the largest home-furnishings retailer hasn’t been able to crack the market in a decade of trying. The reason: it won’t pay a bribe. As Prime Minister Arseniy Yatsenyuk’s government rushes to fend off Russia’s expansion and raise the $35 billion it says it needs to avoid default, the country of 45 million faces the more basic problem of rampant graft that no leader has been able to tackle in 23 years of independence. Stuck between the European Union and its former imperial master Russia, Ukraine has emerged as the most corrupt country on the continent, according to Transparency International. That and “incompetent” leadership are the reason a nation endowed with most of the ingredients needed to create a vibrant economy fell so far behind its peers, according to analysts including Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London.
‘Cement Shen’ Detained Spurs Scavenging as China Developer Fails - (www.bloomberg.com) Amid the cluster of half-built brick townhouses surrounded by budding peach groves on the outskirts of Fenghua city, south of Shanghai, workers last week could be seen taking down metal scaffolding and hauling away steel plates. They had heard the news about “Cement Shen,” the nickname of the developer whose Zhejiang Xingrun Real Estate Co. became insolvent this month with 3.5 billion yuan($563 million) in debt, according to an official in the eastern Chinese city of Fenghua, 120 miles (190 kilometers) from Shanghai. Authorities detained founder Shen Caixing and his son for illegal fundraising, Xu Mengting, director of the government information office, said in a March 21 interview. “The developer owed us hundreds of thousands of yuan” for scaffolding and steel, said workers Xie and Wang, who would only give their surnames as they collected dozens of long metal plates. “We are taking these materials back for now, because there’s no work here.”