KeNo's Housing and Economic Portal: Friday December 4 Housing and Economic stories

Thursday, December 3, 2015

Friday December 4 Housing and Economic stories

Shanshui Default Woes Hit China Inc. as More Bond Sales Scrapped - (www.bloomberg.com) The default by China Shanshui Cement Group Ltd. is forcing more Chinese companies to scrap bond sales as yields surge. About 43 companies have canceled or delayed 46.7 billion yuan ($7.3 billion) of notes since the cement maker issued a default warning on Nov. 5 before missing the payment, according to statements to Shanghai Clearing House and Chinamoney. In the 10 trading days after Baoding Tianwei Yingli New Energy Resources Co. defaulted last month, only nine companies scrapped a total of 8.8 billion yuan of bond issuance. “Investors didn’t expect Shanshui’s default because it appeared that its cash flow was still OK,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “The default is having a bigger impact on the market than previous defaults this year.” More Chinese companies are struggling to repay debt amid the worst economic slowdown in a quarter century. Shanshui was at least the sixth firm to default in the local corporate bond market this year. Hua Chuang Securities Co. estimated the total amount of new debt being used to cover interest will be a record this year at 7.6 trillion yuan, up 5 percent from last year.

Oil companies brace for big wave of debt defaults - (www.cnbc.com) Low oil prices are leaving many oil and gas companies with difficult debt loads, causing them to default at an extraordinary rate. On top of that, rating firm Moody's forecasts the default rate will increase. "The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this year," said Sharon Ou, Moody's Credit Policy Research senior credit officer. The strain on the oil patch comes after years of borrowing heavily at the start of the domestic energy renaissance. At the time, oil was hovering around $100 a barrel. But now, with West Texas Intermediate crude oil slightly above $40 a barrel, these companies are seeing their revenue dry up — and remain saddled with debt.

Oil prices could rattle stocks in 2016: Bouroudjian - (www.cnbc.com) As someone in their mid-50's, I am old enough to remember the start of oil-price gouging and the beginning of OPEC (Organization of Petroleum Exporting Countries) holding our energy consumption hostage by controlling the supply of crude and keeping prices high. I can recall waiting in line with my late father for hours to get a tank full of gas because shortages were so widespread that refineries around the country sat idle. The price of crude skyrocketed and the economy seized. The U.S. found itself in yet another recession, this time caused by outside forces controlling our input costs. But something wonderful has happened in the last few years — technology has forced OPEC to back off. The U.S. will be held hostage no longer and that is bullish, long term, for everything. We are watching OPEC slowly disintegrate, and I couldn't be happier.

Deepening Metals Rout Sends Copper Below $4,500 as Nickel Slumps - (www.bloomberg.com) Copper fell below $4,500 a metric ton for the first time in six years and nickel touched the lowest in more than a decade on concern producers aren’t doing enough to trim a glut of metal. The retreat in commodities helped send a gauge of mining companies to near the lowest in almost seven years. The London Metal Exchange’s index of six main contracts has slumped 27 percent this year, the most since the global financial crisis in 2008, as a slowdown in top user China cut demand. Expectations that the Federal Reserve will soon raise U.S. interest rates have boosted the dollar and made metals more expensive for buyers holding other currencies. At the same time, that’s lowering production costs of companies outside the U.S. and encouraging them to maintain output, according to T-Commodity, a Milan-based consultancy.

Masters of the Finance Universe Are Worried About China - (www.bloomberg.com) David Tepper says a yuan devaluation may be coming in China. John Burbank warns that a hard landing there could spark a global recession. Tepper, the billionaire owner of Appaloosa Management, said last week at the Robin Hood Investor’s Conference that the Chinese yuan is massively overvalued and needs to fall further. His comments follow similar forecasts from some of the biggest hedge fund managers, including Crispin Odey, founder of the $12 billion Odey Asset Management, who predicts China will devalue the yuan by at least 30 percent.

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