Summary The weak link in China’s financialized economy is the country’s Wealth Management Products. They are short in duration, widely sold by formal and informal institutions, and are invested in important institutions including corporate bonds and smaller banks. We think a run on WMPs is quite likely as banks face a rising inability to pay […]
April 10, 2017 — 11:11 AM HKT Andrew Kemp Collier, Managing Director, Orient Capital Research joined Juliette Saly and Doug Kirzner to discuss the impact of geopolitical concerns such as the Syrian air strikes and the move of American warships to waters near North Korea. He also spoke on trade ties between the U.S. and […]
False Dawn in China’s Economy Analysts Jump too Quickly on News out of the National People’s Congress The economic news out of China recently has drawn glowingChina’s industrial output in January and February rose 6.3 per cent compared with the same period a year ago and fixed-asset investment strengthened to 8.9 per cent in the […]
Fed fund rates The US Federal Reserve Bank in a widely expected decision, has raised interest rates by 25bps. But its projections for further rates increases, economic growth and inflation were lower than expected. US treasury bond yields and the US dollar have tumbled and there has been a big reaction in emerging markets. On […]
Summary
One of the likely outcomes of China’s rising debt will be a shortage of liquidity for more remote geographic regions, along with corporates with little access to the power centers in Beijing. One short-term solution is the debt-for-equity swap program, which is allowing local SOEs to place the debt in the banks in the form of equity, and permitting these firms to continue to borrow from the banks. This is one tool that is keeping local governments — and their ailing state firms – alive.
However, although this program has come from Beijing, the leadership has been reluctant to allow local governments full control over the swap as it encourages continued waste of capital in inefficient, older industries. It may use political methods – the anti-corruption campaign – for fiscal ends.
Trouble ahead for Chinese banks? A decline in the yuan’s value towards the end of the year could hurt lenders, warns Andrew Collier of Orient Capital Research. http://video.cnbc.com/gallery/?video=3000600924
Qualcomm-NXP and China Chinese Opposition Unlikely Merger between Qualcomm and NXP We think this is a win-win deal between NXP and Qualcomm, providing more upside for Qualcomm. On the one hand, Qualcomm is seizing the burgeoning automotive market and IoT (Internet of Things), which is expected to bring economic scale and client loyalty in the […]
The PBOC’s New Forex Strategy Tapping Foreign Loans to Reduce Capital Flight Chances of Success are Slim As China’s economy slows, the country’s economic leaders have been cycling through stimulative policies, finding creative ways to generate additional leverage in a system already over-leveraged. In 2015, the stock market was view as an easy source of […]
John Bachelor Show
Summary Based on our interviews, we believe the property sector will face a liquidity crisis when the peak of debts come due in the second half of 2017 and beginning of 2018. According to the Centaline Group, China’s property developers raised Rmb1.14trn in 2016 through privately raised company bonds, corporate bonds, medium term notes and […]