Posts Tagged ‘Chinese banks’

Moody’s Issues Stern Warning On China’s Pyramid Bank Recapitalization Scheme; Has CIC Entered A Funding Crisis?

Moody’s Issues Stern Warning On China’s Pyramid Bank Recapitalization Scheme; Has CIC Entered A Funding Crisis?

Courtesy of Tyler Durden

Moody’s is out with a surprisingly frank appraisal of the Chinese banking system’s precarious capitalization trend, by looking at the recent RMB 54 billion capital raise in the interbank market by the domestic arm of the Chinese Sovereign Wealth fund (CIC), which was "the first part of an RMB 187.5 billion overall fund-raising program mainly to provide additional capital to the three largest state-owned banks, a policy lender, and a policy insurance company."

As Moody’s oh so correctly concludes: "Recapitalizing banks with bond proceeds from banks is credit negative because it increases the effective leverage of the banking system. The transaction’s impact on the system is limited in this case because the increased leverage is not significant, but it would be problematic if effective leverage continues to increase and China’s economic growth stalls." Moody’s stops one step short of calling this transaction what it is: using debt purchased by other banks to recapitalize deteriorating loans on the banks’ asset side: "the increases in assets and equity are artificial and without real economic substance: the increase in reported equity on banks’ balance sheets enables the banks to lend more and effectively leverages up the system. Assuming banks fully deploy the capital raised, the resulting increase in the risk-weighted assets would be RMB 187.5 billion divided by 11.5% (the minimum capital requirement)." What is also not said, but is glaringly obvious, is that the Chinese sovereign wealth fund is likely in a major need of recapitalization, courtesy of its extensive US financial sector equity holdings.

From Moody’s:

Last week, Huijin, the domestic arm of China Investment Corp (China’s sovereign wealth fund), raised RMB 54 billion in the domestic interbank market. It was the first part of an RMB 187.5 billion overall fund-raising program mainly to provide additional capital to the three largest state-owned banks, a policy lender, and a policy insurance company. 

Recapitalizing banks with bond proceeds from banks is credit negative because it increases the effective leverage of the banking system. The transaction’s impact on the system is limited in this case because the increased leverage is not significant, but it would be problematic if effective leverage continues to increase and China’s economic growth stalls. Even without an official breakdown of the bonds’


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Chinese Banks Face Default Risk on 23% of $1.1 Trillion Loans; Chinese Rating Agency Criticizes Moody’s, Fitch, S&P

Chinese Banks Face Default Risk on 23% of $1.1 Trillion Loans; Chinese Rating Agency Criticizes Moody’s, Fitch, S&P

Courtesy of Mish 

Here is an interesting pair of stories at odds with each other, the first article is about problem loans at Chinese banks, the second is about a rating agency mud fight.

Bloomberg reports Chinese Banks See Risks in 23% of $1.1 Trillion Loans

Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator.

About half of all loans need to be serviced by secondary sources including guarantors because the ventures can’t generate sufficient revenue, the person said, declining to be identified because the information is confidential. The China Banking Regulatory Commission has told banks to write off non-performing project loans by the end of this year, the person said.

The nation’s five-largest banks, including Agricultural Bank of China Ltd., plan to raise as much as $53.5 billion to replenish capital after the sector extended a record $1.4 trillion in credit last year.

“In China now, it is the same as the people getting loans in Phoenix here in the U.S. three years ago,” said Vikas Pershad, chief executive officer of Chicago-based Veda Investments LLC. “People who want money get money, and then they all lose track of it.”

Local governments set up the financing vehicles to fund projects such as highways and airports due to limits on their ability to directly borrow money. The central government this year restricted borrowing on concern money isn’t being used for viable projects.

“The issue is symptomatic of the way the stimulus package was rolled out in 2008,” said Nicholas Consonery, Asia specialist at the Eurasia Group. “It is difficult for local governments to finance these projects. It is written under the Chinese constitution that local governments cannot offer their own debt.”

Chinese Rating Agency Criticizes Moody’s, Fitch, S&P

The Financial Times reports China rating agency condemns rivals

The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated.

“The western rating agencies are politicised and highly ideological and they


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Zero Hedge

The Hidden Motives Of The Chinese Silk Road

Courtesy of ZeroHedge. View original post here.

Authored by YaleGlobal Online via OilPrice.com,

China’s Belt and Road Forum, hosted with great fanfare, signals the priority of this flagship connectivity initiative while also underlining its credentials as the new “shaper” of global trends and norms. Exhorting all countries to participate, Chinese President Xi Jinping suggested that “what we hope to create is a big family of harmonious co-existence.”

...



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Sports, Stocks, & the Magic Quadrants

 

Sports, Stocks, & the Magic Quadrants

Courtesy of Wade, Investing Caffeine

Picking stocks is a tricky game and so is sports betting. With the NFL and NCAA football seasons only a few months away, we can analyze the professional sports-betting industry to better understand the complexities behind making money in the stock market. Anybody who has traveled to Las Vegas, and bet on a sporting event, understands that simply choosing a game winner is not enough for a casino to pay you winnings. You also need to forecast how many points you think a certain team will win or lose by (i.e., the so-called “spread”) – see also ...



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Biotech

We have a vaccine for six cancers; why are less than half of kids getting it?

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

We have a vaccine for six cancers; why are less than half of kids getting it?

Courtesy of Electra D. Paskett, The Ohio State University

Early in our careers, few of us imagined a vaccine could one day prevent cancer. Now there is a vaccine that keeps the risk of developing six Human Papillomavirus (HPV)-related cancers at bay, but adoption of it has been slow and surprising low.

Although it’s been available for more than a decade, as of 2014 only 40 percent of girls had received the full three doses of the vaccine, while only ...



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ValueWalk

Bad ROIC Drives Bad Valuation Analysis

By David Trainer. Originally published at ValueWalk.

Return on invested capital (ROIC) is not only the most intuitive measure of corporate performance, but it is also the best. It measures the amount of profit generated for every dollar invested by a company, and has clear links to valuation. No wonder the top buy-side investors increasingly want companies to tie executive compensation to ROIC.

Unfortunately, many investors still rely on...



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Digital Currencies

Bitcoin Buyer Beware

Courtesy of Zero Hedge

Entrepreneurs have a new trick to raise money quickly, and it all takes place online, free from the constraints of banks and regulators. As Axios reports, since the beginning of 2017, 65 startups have raised $522 million using initial coin offerings — trading a digital coin (essentially an investment in their company) for a digital currency, like Bitcoin or Ether.

One recent example, as NYT reports, saw Bay Area coders earn $35 million in less than 30 seconds during an online fund-raising event...



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Insider Scoop

Marveling At Multi-Factor ETFs

Courtesy of Benzinga.

Related This Goldman ETF Keeps Growing Getting Smarter About Smart Beta Related ...

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Chart School

Russell 2000 at Rising Support

Courtesy of Declan.

There wasn't much to say about today, but the one index which caught my attention was the Russell 2000. The index caught a bounce in demand at the rising trendline and also did enough to recover the 20-day MA. Traders looking for pullback opportunity could take a look at the Russell 2000. Stops on a loss of 1,397.


The Nasdaq is primed for a move to challenge 6,350. Today's doji marks indecision just below 6,250 but if it can push above this price level it would likely trigger a spate of short covering. Technicals hav...

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OpTrader

Swing trading portfolio - week of June 19th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Mapping The Market

Frontier laid off state Senate president after broadband vote it didn't like

Courtesy of Jean-Luc

Speaking of FTR – not nice people…

Frontier laid off state Senate president after broadband vote it didn’t like

By Arstechnica.com

Broadband provider Frontier Communications recently laid off the West Virginia state Senate president after a vote the company didn't like—and yes, you read that correctly.

West Virginia does not have a full-time legislature, and state lawmakers can supplement their part-time government salaries ($20,000 a year,&...



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Promotions

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We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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