KeNo's Housing and Economic Portal: Monday August 31 Housing and Economic stories

Sunday, August 30, 2015

Monday August 31 Housing and Economic stories

China shadow banks appeal for government bailout - (www.ft.com) As China’s economy slows, concerns are mounting over rising defaults, especially on loans from non-bank lenders, which provide credit to risky borrowers at high interest rates. Eleven shadow banks have written an open letter to the top Communist party official in northern China’s Hebei province asking for a bailout that would enable the bankrupt credit guarantee company to continue to backstop loans to borrowers. If the guarantor cannot pay, it could spark defaults on at least 24 high-yielding wealth management products (WMPs). Analysts worry that a series of bailouts in recent years has encouraged irresponsible lending by fuelling the perception the government will not tolerate default. The latest appeal for a bailout will again force officials to choose between ensuring short-term financial stability or imposing market discipline on investors, which should improve lending practices in the long term.

Carlyle's Sequa Said to Burn Through 44% of Cash; Loans Plunge - (www.bloomberg.com) Sequa Corp., an aerospace parts servicer controlled by Carlyle Group LP, burned through nearly half of its cash in the second quarter as earnings tumbled and a recently acquired unit ran into trouble, according to three people with knowledge of the company’s performance. The company, which doesn’t publicly disclose its financials, told holders of its nearly $1.9 billion of debt last week that it used up nearly $36 million of its cash and had just under $45 million left on June 30, said the people, who asked not to be identified discussing the private report. Prices of Sequa’s debt plunged. Its $1.3 billion of term loans dropped more than 1.8 cents on the dollar last week to 86.43 cents, according to data compiled by Bloomberg. The debt was trading as high at 98.1 cents in March.

Noble Group's Kurtosis Awakening Moment For The Commodity Markets - (www.zerohedge.com) Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market. Noble Group is Asia’s largest commodities trader. According to GMT research, Noble Group took what they have estimated as between $4 to $6 Billion worth of fair value gains on asset valuation over the last 5 years. Just prior their Q2 earnings release, we published the reasons outlining why we believe that the trader is an accounting hocus-pocus. Since we are exactly one week after their Q2 results, in theory Standard and Poor’s had time to do their homework. We expect a big announcement of S&P on Noble Group later this week. UK insurers (who have also a foot in the cargo insurance market) have dumped Noble Group bonds overnight.

The Commodity Currency Plunge Is Making the Oil Crash Even Worse - (www.bloomberg.com) Crude bulls, stung by the worst July on record, should expect further pain as slumping commodity currencies cut production costs. Drillers from Russia to Canada, the world’s second- and fourth-biggest oil producers, sell crude in U.S. dollars while paying most operating costs in local currencies. The Canadian dollar dropped to an 11-year low against its U.S. counterpart this month while the Russian ruble trades near a six-month low. Global oil supply has proven resilient. A 60 percent decline in U.S. dollar prices since June 2014 hasn’t curbed U.S. production, which is near the highest level in four decades. Iraq is producing at a record pace and Russian oil output reached a post-Soviet high this year. The world’s oil glut will last through 2016, the International Energy Agency said in an Aug. 12 report. “The cross-commodity downdraft led by oil, gold and copper has hit producer currencies hard,” Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by phone. “The weaker their currencies get versus the dollar, the lower their costs. This further weighs on commodity prices and just adds to the negative spiral.”

China's Richest Traders Are Rushing To Dump Their Stocks To The Retail Masses, Just Like In The US - (www.zerohedge.com) As it turns out it is not just in the US that the "smart money" is bailing out as fast as it can: according to Bloomberg, the wealthiest investors in China’s stock market are also scrambling for the exits. To wit: "The number of traders with more than 10 million yuan ($1.6 million) of shares in their accounts shrank by 28 percent in July, even as those with less than 100,000 yuan rose by 8 percent, according to the nation’s clearing agency. While some of the drop is explained by falling market values, CLSA Ltd. says China’s rich have taken advantage of state buying to cash out after the nation’s record-long bull market peaked in June."

OTHER STORIES: