Friday September 11 Housing and Economic stories

TOP STORIES:

China banks warn of rising bad loans and falling margins as economy slows - (www.reuters.com) China's largest banks warned of a tough year after posting their weakest half-yearly profit growth in at least six years as a slowing economy forces the lenders to make even more provisions for soured loans and squeezes interest income. State-owned Industrial and Commercial Bank of China (ICBC), China's largest bank by assets, and peers Bank of China (BOC), Agricultural Bank of China and Bank of Communications this week reported another spike in bad loans in the first half and net profits that grew at most by 1.5 percent, a far cry from the double- digit growth banks enjoyed after the 2008 financial crisis. With China's economy set to grow at its weakest pace in a quarter of a century this year, the lenders said they were bracing themselves for even more bad loans as industries ranging from steel to petrochemicals and property struggle.

Carlyle Finds Hedge Funds Hazardous - (www.nytimes.com) If nothing else, the last week has proved it can be very difficult to run a hedge fund. The Carlyle Group, the private equity giant, has known that for much longer. Its Carlyle Capital fund became a harbinger of the financial crisis after it imploded in March 2008. Months later, Blue Wave Partners, Carlyle’s entrance into hedge funds, ended abruptly after it failed to raise enough money from investors. They were among the first in a series of bumps in the road for Carlyle and its hedge fund investments, the most recent of which came to the fore last week, when it announced that its credit-focused hedge fund, Claren Road Asset Management, faced nearly $2 billion in investor redemption requests. Since last September, Claren Road has faced a total of $6 billion in redemption requests.

Zombie Factories Stalk the Sputtering Chinese Economy - (www.nytimes.com) Miao Leijie loses money on each ton of cement his company produces. But stopping production is not an option. When the plant opened in 2011 to supply the real estate and infrastructure industries in the northern Chinese city of Changzhi, the company raised most of the initial money from banks. Now, Mr. Miao, the factory’s general director, needs to keep churning out cement simply so the company can pay the interest on its loans. It will be tough for the business, Lucheng Zhuoyue Cement Plant, to get out of the hole. Customers and investments are drying up, and the company is borrowing even more money to stay afloat. “If we ceased production, the losses would be crushing,” Mr. Miao said, as he chain-smoked in the company’s quiet, spartan office. “We are working for the bank.”

U.S.-based stock funds post $17.8 bln outflows in latest week - Lipper - (www.reuters.com) Aug 27 Investors in U.S.-based funds pulled $17.8 billion out of stock funds in the week ended Aug. 26, marking the biggest weekly outflows since mid-December of last year, data from Thomson Reuters' Lipper service showed on Thursday. Funds that specialize in U.S. shares posted $11.7 billion in outflows to mark their biggest withdrawals since early May, while funds that specialize in non-U.S. shares posted $6.1 billion in outflows to mark their biggest withdrawals since January 2008. Stock exchange-traded funds posted $15.2 billion in outflows, while stock mutual funds posted $2.6 billion in outflows. 

A trading team at a Wall Street bank got whacked with a near-$100 million loss - (www.businessinsider.com)  The losses keep rolling in for big banks' trading desks. Jefferies is taking a hit of nearly $100 million on its distressed trading desk, according to Laura J. Keller and Zeke Faux at Bloomberg. The bankruptcy of one energy company — private equity-backed Samson Resources — caused a substantial portion of the losses, according to the report. Jefferies isn't the only bank to absorb an embarrassing loss this year. Goldman Sachs' trading team also lost between $50 million and $60 million this summer, according to a separate Bloomberg report, in part thanks to positions in energy companies and an underperforming paper company. Jefferies is a part of diversified holding company Leucadia National Corp., which acquired the investment bank in 2012.

Money Pours Out of Emerging Markets at Rate Unseen Since Lehman - (www.bloomberg.com) This week, investors relived a nightmare. As markets from China to South Africa tumbled, they pulled $2.7 billion out of developing economies on Aug. 24. That matches a Sept. 17, 2008 exodus during the week Lehman Brothers went under. The collapse of the U.S. investment bank was a seminal moment in the timeline of the global financial crisis. The retreat from risky assets, triggered by concern over a slowdown in China and higher interest rates in the U.S., has taken money outflows from emerging markets to an estimated $4.5 billion in August, compared with inflows of $6.7 billion in July, data compiled by Institute of International Finance show. 

OTHER STORIES:

JPMorgan Analyst Sees Quantitative Traders Lashing U.S. Equities - (www.bloomberg.com)
Frictions shake Brazil’s ruling coalition - (www.ft.com)
Exclusive: Market Regulators Probing Chaotic ETF Trades - (www.foxbusiness.com)

5 Things to Watch at the Kansas City Fed's Jackson Hole Conference  - (online.wsj.com)
Ackman's hedge fund down 13.1 percent for August  - (www.reuters.com)
US funds compare notes on torrid August - (www.ft.com)
Erdogan Is Fighting Wars on Three Fronts - (www.bloomberg.com)