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This Junk Bond Derivative Index Is Saying Something
Scary About Defaults - (www.bloomberg.com) Citigroup
analysts led by Anindya Basu point out that spreads on the CDX HY,
as the index is known, are currently pricing in an expected loss of 21.2
percent, which translates into something like 22 defaults over the next five
years if one assumes zero recovery for investors. That is a pretty big
number once you consider that a total of 41 CDX HY constituents have defaulted
since the index really began trading in 2005, equating to about 3.72
defaults per year. A big chunk of those defaults (17) occurred in 2009 in the
aftermath of the financial crisis. What to make of it all? Actual recoveries
during corporate default cycles tend to be higher than the worst-case scenario
of zero percent. In fact, they average somewhere in the 26 percent range,
which would imply 29 defaults over the next five years instead of 41.
BlackRock's
$32 Billion Hedge-Fund Business Has a Little Problem - (www.bloomberg.com) Yes,
he runs the biggest asset management firm the world has ever seen. But right
now, Laurence D. Fink has a little hedge-fund problem. Fink’s BlackRock Inc.,
the $4.5 trillion behemoth known for its mutual funds and ETFs, threw in the
towel on a macro hedge fund last month in a setback that
one of the company’s executives described as a “huge disappointment.” While
hedge funds represent only a tiny fraction of BlackRock’s total assets under
management, the stumble nonetheless underscores the upheaval convulsing the
broader hedge-fund industry, as well as the particular challenges facing
BlackRock as Fink tries to attract hedge-fund money -- and the hefty fees that
come with it.
Governor of Puerto Rico Warns of Looming
Default Without Bankruptcy Plan - (www.nytimes.com) The governor of Puerto Rico redoubled threats
on Wednesday of a major bond default, as an effort to help the struggling
commonwealth use bankruptcy to shed debt headed for defeat in Congress. Gov.
Alejandro García Padilla warned in a speech at the National Press Club in Washington
that Puerto Rico would probably miss debt payments in January or May because
its government had run out of cash. “There is no money,” he said. “I don’t have
a printing machine.” The governor’s comments came as Congress omitted from a
federal spending bill any measures to allow Puerto Rico to restructure its
roughly $72 billion of debt in Federal Bankruptcy Court. Mr. García Padilla and
his Democratic Party allies in Washington have been pushing for months to allow
the island to take shelter from its creditors through bankruptcy. Chapter 9
bankruptcy, which is available to cities, counties and other local governments
on the mainland, specifically excludes Puerto Rico as well as states.
Behind
Puerto Rico's Woes, a Broadly Powerful Development Bank - (www.nytimes.com) If anything stands as a symbol of how Puerto
Rico ended up mired in billions of dollars of debt, it is an oceanside golf
resort going to seed some 15 miles east of San Juan. Known until this month as
the Trump International Golf Club Puerto Rico, it was built as a for-profit
venture, subsidized by federal taxpayers and backed by the island’s powerful
Government Development Bank, which sold to investors and guaranteed repayment
of more than $50 million in tax-exempt bonds. Despite the Trump name, which the
former owners licensed from the billionaire investor and now presidential
candidate Donald J. Trump, the resort failed to attract enough golfers since
the first tee-off in 2004. This year, it went bankrupt. (Mr. Trump was not
involved in the financing or operation of the club, but he is a creditor.)
Then, about a week ago, a buyer scooped up the property, wine cellar and all,
for a mere $2.2 million and is rushing to get it ready for a Professional
Golfers Association tournament in March, a nationally televised event and a
point of pride for Puerto Rico.
Peso Slumps 29% as Macri Propels Argentina Into
New Currency Era - (www.bloomberg.com) Argentina’s
peso tumbled as much as 30 percent as newly inaugurated President Mauricio
Macri fulfilled his campaign promise of letting the currency float freely. Macri’s
push for a devaluation was a key part of the economic overhaul he says is
needed to lure investment and jump-start an economy suffering from lackluster
growth, inflation estimated at 25 percent and a shortage of dollars. The
decline brought the official rate closer in line with where the peso had been
trading in unregulated markets. The free float also carries risks, with the
currency’s plunge potentially exacerbating inflation and spurring a backlash
from Argentines who see the value of their savings sink in dollar terms.
US
oil breaks below $36 on EIA data; Fed in focus - (www.cnbc.com) Brent was
last down $1.25 at $37.20 a barrel. On Tuesday, the contract closed up 53 cents
in its first gain in eight days. Analysts are watching for any test of Brent's
December 2008 low of $36.20, with a break below that level taking the benchmark
to levels not seen since 2004. West Texas Intermediate crude futures were down $1.56 at $35.79
per barrel, after rising more than $1 on Tuesday. WTI was supported by looming
changes to legislation that are expected to enable exports of U.S. crude oil. "This
data is decidedly bearish as crude stocks now sit at record levels for this
time of year and just off the all-time high," said Chris Jarvis, an
analyst at energy consultancy Caprock Risk Management in Frederick, Maryland.
Here's What 7 Years at Zero Rates Have Looked
Like - (www.bloomberg.com) The
Federal Reserve is expected to raise interest rates on Wednesday, exactly seven
years after the central bank cut them to almost zero in response to the
deepest recession in the post-World War II era. As this unprecedented era
of easy monetary policy closes, here's a walk through seven years at zero to highlight
the obstacles that policy makers navigated to restore labor-market health and
enable liftoff. Fed officials lowered the federal funds rate into a 0 to
0.25 percent range in December 2008 as the nation's economic state deteriorated
and the collapse of Lehman Brothers sent shock-waves through global financial
markets. The Fed "will employ all available tools to promote the
resumption of sustainable economic growth and to preserve price
stability," officials said in their post-meeting statement.
Brazilian Stocks Decline Most in World on
Credit Downgrade Fears - (www.bloomberg.com) Brazil’s
stocks fell the most among major global benchmarks on concern the country may
be cut to junk by a second credit-rating company because of government plans to
loosen its fiscal policy. Finance Minister Joaquim Levy and President Dilma
Rousseff have already agreed that he will leave the government after the
president decided to reduce the target for a budget surplus before interest
payments in 2016, Valor Economico columnist Claudia Safatle wrote in the newspaper.
Moody’s Investors Service has said it may cut Brazil to junk, following a
similar decision by Standard and Poor’s in September. "The possibility of
a downgrade has been scaring investors for a long time as the market watches
Brazil’s situation deteriorate day after day," Paulo Henrique Amantea, an
analyst at brokerage H.H. Picchioni, said from Belo Horizonte. "There are
no prospects for improvements in sight. No way a investor will put money here
with so many uncertainties."
Yields on junkiest US bonds breach 18% - (www.ft.com) It
may be known as junk, but there is a reason bankers like to market speculative
bonds as high-yield. The yield on the lowest rated slices of US corporate debt
— those rated triple C or lower by one of the major credit agencies — shot
above 18 per cent as investors scrambled out of one of the riskiest parts of
the bond market, according to Bank of America Merrill Lynch data. Investors
have fled junk bond mutual funds and exchange traded funds at a brisk pace,
with fund flows figures published by Lipper showing more than $3.5bn pulled
from the two groups in the last week, US capital markets correspondent
Eric Platt reports. BlackRock iShares HYG and State Street’s JNK, the two
largest high-yield bond ETFs, have recorded outflows of $749m and $897m since the
month began, according to FactSet. The wider US high yield market has also
shuddered after a wave of redemptions hit three funds — forcing two to shutter
in the past week — with the yield on the BofA Merrill Lynch high yield index
rising above 9 per cent for the first time since October 2011.
Spain’s
Biggest Bankruptcy Ever Hits Banks, Mexico, Brazil, Descends into Bitter Farce - (www.wolfstreet.com) Abengoa, the Spanish renewables giant that once
thought it had mastered the dark arts of financialization only to crumble under the weight of its
own debt, urgently needs a lifeline. In November, it filed for preliminary
protection from creditors. If it doesn’t get a lifeline, it will be go
down in history as Spain’s biggest bankruptcy ever. According to the latest
accounts, its creditors may have thrown it that lifeline, but barely enough
to last through the very inconvenient general elections this Sunday and
the holidays, when the government is off. Amazing as it seems for a publicly
traded company, there’s still “no official figure for the firm’s total
financial liabilities,” Reuters reported, though “separate sources
familiar with the matter say they total at least €25 billion.”
Junk-Bond Selloff Intensifies - (online.wsj.com) Investors
retreated from the U.S. junk-bond market for the third straight trading day and
stocks of large asset managers were hit by heavy selling, a sign that the deepest turmoil in financial
markets
since summer is intensifying. Some investors reported difficulties selling
lower-rated bonds quickly or at listed prices, though others said the market
appeared to stabilize somewhat after the record plunge in prices on Friday. While
the market for the highest-quality bonds remains intact, there are signs across
Wall Street that investors are losing confidence in lower-quality bonds and the
firms that most actively deal in them. Waddell & Reed Financial Inc., which manages the $6.2 billion
Ivy High Income Fund that has suffered the largest outflows this year of any
junk-bond fund, tumbled 7.5%. AllianceBernstein Holding LP, which runs the $5.8 billion AB High
Income Advisor fund, dropped 7%.
Third Avenue Sought Internal Loan Approval
Before Fund Shut - (www.bloomberg.com) Two
months before it froze cash withdrawals from a $788.5 million high-yield bond
fund, Third Avenue Management requested approval for interfund lending, a
program sought by an increasing number of mutual fund managers to bridge
short-term liquidity needs. Third Avenue’s request, disclosed in an Oct. 14
filing with the U.S. Securities and Exchange Commission, would allow its mutual
funds to temporarily borrow money from one another. Investors who are redeeming
could get paid with the loans almost immediately, even if it took the firm
several days to receive cash from the sale of assets. Third Avenue’s
application is pending, and it’s unlikely that an earlier approval would have
prevented the shutting of the Focused Credit Fund because the loans only last a
few days and don’t provide longer-term liquidity. The firm pursued fund-to-fund
lending as a precaution for 2016 and not to deal with the redemptions from the
credit fund, said a person familiar with the matter, who asked not to be
identified because the information is private.
Muni Bonds Backed by Junk Companies Feel Pain
of High-Yield Rout - (www.bloomberg.com) The
corporate junk-bond rout has mostly left few ripples in the $3.7 trillion
municipal market, with one exception: Tax-exempt debt issued by the high-yield
companies. Local-government bonds sold on behalf of U.S. Steel Corp., the
nation’s second-largest producer, traded Monday at an average of about 67 cents
on the dollar, the lowest price since they were issued in November 2009 and
down from 113 cents to start the year, data compiled by Bloomberg show. They
have a B2 rating from Moody’s Investors Service, five steps below investment
grade. Trading in tax-free debt backed by Marathon Oil Corp. jumped to a
two-month high on Dec. 11, with prices touching the lowest in nine days even
though it has an investment-grade rating. Fortunately for high-yield muni
buyers, corporate-backed credits make up only a sliver of the tax-exempt
market. There’s about $7 billion of fixed-rate, non-investment-grade and
tax-free industrial-development bonds, Bloomberg data show. By comparison,
Puerto Rico has $70 billion of debt outstanding, while states and localities
have sold $23 billion of junk-rated tobacco securities, the data show.
Shipping Index Plunges to Fresh Record Amid
China Steel Slump - (www.bloomberg.com) The
shipping industry’s most-watched measure of rates for hauling commodities
plunged to a fresh record amid a persisting glut of ships and speculation
weakening Chinese steel output could translate into declining imports of iron
ore to make the alloy. The Baltic Dry Index fell 4.7 percent to 484 points, the
lowest in Baltic Exchange data starting in January 1985. Rates for three of the
four ship types tracked by the exchange retreated. China, which makes about
half the world’s steel, is on track for the biggest drop in output for more
than two decades, according to data compiled by Bloomberg Intelligence. Owners
are reeling as China’s combined seaborne imports of iron ore and coal --
commodities that helped fuel a manufacturing boom -- record the first annual
declines in at least a decade. While demand next year may be a little better,
slower-than-anticipated growth in 2015 has led to almost perpetual
disappointment for rates, after analysts’ predictions at the end of 2014 for a
rebound proved wrong.
Fed Dread Turns Mexico Into ‘Whipping Boy’ as
ETF Outflows Surge - (www.bloomberg.com) Wagers
that the Federal Reserve will raise interest rates for the first time in almost
a decade are souring sentiment toward Mexican stocks. Traders have pulled $840
million from the nation’s largest exchange-traded equities fund this year, the
biggest outflow among developing nations, according to data compiled by
Bloomberg. With one of the world’s most-traded currencies, deep corporate ties
to the U.S. and policy makers who have pegged the timing of their rate
decisions to the Fed’s calendar, Mexico is a popular way for foreign investors
to bet on all things emerging markets, said Paul Christopher, the St.
Louis-based head global market strategist for Wells Fargo Investment Institute.
Dubai Developers `Strangle' Supply to Stem
Price Drop, CBRE Says - (www.bloomberg.com) Dubai
developers halted delivery of about a quarter of the properties set for
completion this year, bolstering apartment rents but failing to stop a 16
percent price decline, according to CBRE Group Inc. Single-family home rents
declined 4 percent compared with a 14 percent drop in values, Matthew Green,
head of U.A.E. research at CBRE, said at a conference today. Apartment rents
were unchanged. Out of 20,000 homes CBRE estimated were ready for completion
this year, 14,000 were brought to the market, Green said. The supply squeeze
and growing leasing demand is maintaining a gap between rents and values. While
some developers purposely delayed completion, some projects were held back by
the approvals process or buyers who failed to make payments, CBRE said.
Wells Fargo warns of ‘stresses’ in its energy
portfolio - (www.ft.com) The
head of corporate banking at Wells Fargo, the biggest bank in the world by market
capitalisation, has warned of "stresses" in its energy portfolio, as
the ongoing slump in the price of oil begins to weigh heavily on servicers and
producers. Kyle Hranicky, who spent nine years at the helm of the Houston-based
Wells Fargo Energy Group before rising to head the corporate banking division
in May, said that the bank had been in discussions with clients for several
months about preserving cash and cutting borrowing limits. "Some have
liquidity to survive the cycle but others will be under significant stress and
may be forced to sell assets or recapitalise," he said. "We've been
in the energy business for over 30 years, so we're comfortable with cycles. But
this one feels deeper and broader and could last longer."
Lucidus Has Liquidated $900 Million Credit
Funds, Plans to Shut – (www.bloomberg.com) Lucidus
Capital Partners, a high-yield credit fund founded in 2009 by former employees
of Bruce Kovner’s Caxton Associates, has liquidated its entire portfolio and
plans to return the $900 million it has under management to investors next
month, according to a statement Monday from the London-based company. “The fund
has exited all investments,” Chief Executive Officer Christon Burrows and Chief
Investment Officer Geoffrey Sherry said in the statement obtained by Bloomberg.
“We would like to thank our investors and counterparties for their support over
the years." A redemption notice from a significant investor in October
triggered Lucidus’s decision to start winding down the portfolio and shedding
staff, according to a person familiar with the fund’s operations, who asked not
to be identified speaking about internal deliberations.
Investors See More Carnage as Third Avenue
Spurs Contagion Risk - (www.bloomberg.com) Top
bond managers are predicting more carnage for high-yield investors amid a
market rout that forced at least three credit funds in the past week to
wind down. Lucidus Capital Partners, a high-yield fund founded in 2009 by
former employees of Bruce Kovner’s Caxton Associates, said Monday it has
liquidated its entire portfolio and plans to return the $900 million it has
under management to investors next month. Funds run by Third Avenue Management
and Stone Lion Capital Partners have stopped returning cash to investors, after
clients sought to pull too much money. “It could get pretty ugly this week,”
Michael Contopoulos, high-yield strategist at Bank of America Corp., said in an
interview with Bloomberg TV’s Stephanie Ruhle. “The most recent sell-off has
not been fundamentally driven,” he said, citing constrained dealer balance
sheets as a factor.
Why
junk bonds won't spark new crisis: BlackRock - (www.cnbc.com) As the drop in high-yield, or junk, bonds,
claimed its biggest victim since the 2008 financial crisis, BlackRock's Peter Fisher said Monday he does not see the
risky end of the corporate fixed income market sinking the overall U.S. economy
like the bust in subprime mortgages did during the Great Recession. "[The
junk bond drop] may feel like it for corporate CFOs, but I don't think it's
systemic for GDP in the same way," Fisher told CNBC's "Squawk Box,"
in the wake of Third Avenue Management's decision, announced Thursday, to block
further investor redemptions from its near $1 billion high-yield Focused Credit
Fund, which was being liquidated. A day later, on Friday, Stone Lion Capital
Partners, a $1.3 billion hedge fund specializing in distressed debt, suspended redemptions in its oldest fund, which like Third
Avenue has been hit by companies defaulting on their obligations.
The
problem with junk bonds is way bigger than oil - (www.cnbc.com) The troubles in the high-yield bond market
have been closely linked to crude
oil's slide. But this conventional wisdom doesn't withstand a peek
under the hood of the most popular way to play so-called junk bonds. Taking the
popular iShares high-yield ETF (HYG) as a proxy for the space,
one finds that there just isn't a gigantic amount of energy bonds contained
therein. The energy sector's weighting in the ETF is only 11.4 percent. That
makes energy the fourth-most-prominent sector in the product; communications is
No. 1, with more than double the weighting. In terms of simple numbers, only
16.4 percent of the bonds in the sector are energy bonds.
Unicorns suddenly looking a lot less enchanting - (www.cnbc.com) The unicorn club is filling up, and it's
causing unease among investors. The number of privately held tech start-ups
valued at $1 billion or more now tops 140. But there's a widespread concern on
Wall Street that because this new breed of start-ups isn't profitable and can't
live up to the super-high valuations, companies are staying private a lot
longer. This year has seen the lowest number of tech companies come
public since 2009. According to Renaissance Capital, there have been just 22
tech IPOs in 2015 thus far, compared to 55 in 2014. When Fidelity and BlackRock
marked down their investments in companies like Dropbox and Snapchat in
November, alarm bells were rung. Has the bubble burst? According to PrivCo, a
company that provides financial data on major privately held companies, these
tech names are reluctant to go public because of the shaky IPO market. The
companies that have gone public end up facing little flourish, and have found
their worth on Wall Street is often lower than in the private market.
Junk-Bond Fund’s Demise Highlights SEC
Mutual-Fund Worries - (online.wsj.com) The demise of a Third Avenue
Management LLC junk-bond
fund last week underscores financial regulators’ concerns about risks in mutual
funds and highlights Washington’s urgency in trying to address those worries. Recently
proposed rules are aimed at addressing the problems for investors exposed by the
high-risk mutual fund’s struggles, but those regulations are unlikely to take
effect until 2017 at the earliest. The Securities and Exchange Commission
earlier this fall proposed new rules aimed at preventing the very types of
problems that caused Third Avenue’s fund to essentially declare bankruptcy and
bar investor withdrawals while liquidating the
high-yield Focused Credit Fund.
Those problems boiled down to the junk fund’s inability to raise sufficient
cash to meet a sudden flood of investor redemptions without resorting to fire
sales of its assets. The concern from regulators is that mutual funds and other
asset managers fail to adequately foresee economic shocks, such as rising
interest rates, which cause a fund to drop in value and prompt investors to
bolt for the door. Widespread redemptions, in theory, could strain a fund’s
ability to convert quickly assets into cash for redeeming shareholders,
particularly during a crisis.
Dubai stocks dragged down with Brent oil at
lowest since 2004 – (www.thenational.ae) Regional markets faced further downward
pressure as falling oil prices dragged Dubai, Saudi Arabia and Qatar to
multiyear lows on Sunday. Brent crude futures on Friday fell to levels last
prevailing in 2004, closing down 4.5 per cent to $37.93 per barrel, after the
International Energy Agency warned that oversupply of crude oil may worsen next
year, putting further pressure on prices. The US crude benchmark West Texas
Intermediate also declined, ending down 3.1 per cent at $35.62 a barrel, with
domestic demand hit by forecasts of warmer temperatures in the United States. The
drop in prices prompted a sell-off of equities worldwide, with the S&P 500
and London’s FTSE 100 falling 1.9 per cent and 2.2 per cent, respectively,
despite better-than-forecast economic data from China. The Qatar Exchange in
Doha was the worst-affected market in the region, closing down 3.7 per cent at
9,643.65, its lowest closing level since October 2013. Shares in Saudi Arabia,
the world’s largest exporter of oil, followed close behind, closing down 2.6
per cent at 6,764.60, its lowest close for more than three years.
Hong Kong on the Brink as Developers Offer
Stealth Price Cuts - (www.bloomberg.com) Kowloon
Development Co.’s Upper East project in Hong Kong’s Hung Hom area is offering a
raft of rebates and hidden discounts that can reduce the cost to a buyer as
much as 14 percent, and it will throw in a second mortgage too. The enticements
are paying off. Since its Sept. 5 launch, the company has sold 940 out of 1,008
units. One buyer even snapped up two apartments on the sixth and eighth floors,
according to transaction data published on the company’s website. Kowloon
Development is not alone. Cheung Kong Property Holdings Ltd. and Henderson
Land Development Co. are among Hong Kong developers offering inducements
including stamp-tax rebates, first and second mortgages to keep buyers coming.
That’s allowed them to avoid the outright price cuts they fear could spur a
sharp reversal of gains that made the city the world’s least affordable major
housing market.
Junk Bonds Stagger as Funds Flee - (online.wsj.com) Traders
and regulators have fretted for more than a year that mayhem might ensue if
U.S. mutual funds sought to sell rarely traded bond investments. After
junk-bond prices posted their largest drop since 2011 on Friday, investors say
they are bracing for another difficult week, likely featuring hectic trading
and large splits between buy and sell orders. Gaps as wide as 10% between the
price bondholders are willing to accept and buyers are willing to pay are
likely to be commonplace until at least the conclusion of the Federal Reserve’s
two-day meeting Wednesday, hedge-fund and mutual-fund managers said. The worst
selling lately has hit bonds of especially risky, or distressed, companies,
reflecting the turmoil at the Third Avenue Focused Credit Fund, the junk-bond
fund that shook markets when it halted investors’ withdrawals last week, they
said. But some traders were focusing on large price declines in the securities
of firms that are rated well above distressed levels, which they took as an
unwelcome sign that some investors were selling stronger securities to raise
cash.
Junk Fund’s Demise Fuels Concern Over Bond Rout - (online.wsj.com)
U.S. stock funds post $8.6 bln in withdrawals during weekly
period - Lipper - (www.reuters.com)
High-Yield Fund Blocks Investor Withdrawals - (www.nytimes.com) A
large mutual fund specializing
in risky, high-yielding bonds has blocked investors from getting their money
back, citing difficult trading conditions for its securities. The move,
announced Thursday by Third Avenue Management funds, was a troubling sign of
the recent deterioration in junk bonds, a category that has been hurt in
particular by the debt of energy companies struggling with the slump in oil and
gas prices. Energy debt accounts for roughly a sixth of the market. More
important, the action by Third Avenue highlights a longstanding fear among
regulators and economists that too many investors have piled into risky areas
of the bond market, like leveraged loans and emerging-market debt, as well as
junk bonds.
Currency Traders' Bad Year Gets Worse as
Central Banks Surprise - (www.bloomberg.com) December
is turning into a cruel month for traders counting on cuts in interest
rates to drive down currencies. New Zealand’s dollar jumped the most since
November after central bank chief Graeme Wheeler delivered the policy easing that
economists had predicted without the promise of further reductions. That came
less just a week after his European counterpart, Mario Draghi, sparked the
euro’s biggest rally since 2009 by unveiling a smaller-than-anticipated stimulus package. The elephant in the
room is the Federal Reserve. Its looming policy decision is making it trickier
for speculators to predict the actions of other central banks and to work out
where exchange rates are headed. As with the euro, strategists are now
reassessing forecasts for the kiwi, becoming less certain how far it can extend
this year’s 13 percent drop, which is already the steepest since 2008.
Fosun Built Sprawling Empire Before Guo's
Reported Disappearance - (www.bloomberg.com) Fosun
International Ltd. -- the firm whose billionaire chairman is reportedly missing
-- has built an empire sprawling across insurance, real estate and
entertainment, with another $2 billion of acquisitions announced this year and
yet to be completed. Fosun is competing for Anglo-German banking group BHF Kleinwort Benson Groupand agreed to acquire Israeli insurer Phoenix
Holdings Ltd. in June. Fosun is in the process of acquiring German private
bank Hauck & Aufhaeuser Privatbankiers KGaA and is among investors offering
to take Chinese movie studio Bona Film Group Ltd. private. Existing assets span
finance -- especially insurance --
property, steel, leisure, health and natural resources such as oil and gas.
Insurance businesses acquired by Fosun, such as Portugal’s Cia de Seguros
Fidelidade Mundial SA and Bermuda-based Ironshore Inc.,
provide low-cost funding for acquisitions in other industries.
Iron Ore in Worst Run Since '08 as China's
Steel Output May Drop - (www.bloomberg.com) Iron
ore extended declines for a ninth week, the longest losing streak in seven
years, with Chinese steel production data on Saturday expected to signal a
further weakening in demand. Ore with 62 percent content delivered to Qingdao
dropped 4.3 percent this week, falling to $38.30 a dry metric ton on Friday, a
record low in daily prices compiled by Metal Bulletin Ltd. going back to May
2009. The commodity capped its worst stretch of decreases since October 2008 as
low-cost supplies expand, according to Metal Bulletin’s weekly data. Iron ore
has plunged 46 percent this year on surging output from the biggest miners
including Vale SA in Brazil and BHP Billiton Ltd. and Rio Tinto Group in
Australia. At the same time, China’s on track for the weakest growth since 1990
as the government steers the economy away from heavy industry, hurting demand
for steel, cement and coal. Saturday’s industrial production figures will
probably show further cuts in steel output, says Founder Cifco Futures Co.
Fosun looks badly exposed as boss goes AWOL - (www.reuters.com)
Fosun Group’s AWOL boss leaves the Chinese
group badly exposed. On Dec. 11 China’s top private conglomerate halted trading
in its various listed entities, after Caixin magazine reported Fosun could not
locate Chairman Guo Guangchang. That’s worrying amid a graft crackdown. Guo’s
team can keep things ticking over, but unless he re-emerges soon Fosun’s
strategy and bold overseas dealmaking are both in doubt. Investors have often
stuck by state-owned enterprises even as top execs have been hauled in by
corruption investigators. They see SOEs as vast bureaucracies that grind onward
whoever is in charge. But private sector giants like Fosun, whose Hong Kong
unit Fosun International is worth nearly $15 billion, are different. They often
revolve around one charismatic founder. Hence bonds in various Fosun-linked
companies fell sharply on the news.
