Bloomberg:
- Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said. “We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that.” The Shanghai office of the China Banking Regulatory Commission warned yesterday that a 10 percent fall in property values would treble the number of delinquent loans in the city. Liu Mingkang, chairman of the CBRC, said Jan. 4 that loans were channeled into stock and property speculation last year, which China has been taking measures to stop. “At some point in China, maybe it will be two, three or five years, but at some point there will be in the property markets and in the markets generally, there will be rationalization of very poor lending practices,” McDonald said during the panel discussion on restructuring and refinancing at the Global Loan Market Summit in Hong Kong. Should property prices fall 10 percent in Shanghai, China’s second-most-expensive property market, the ratio of delinquent mortgages would almost triple for the city’s banks to 1.18 percent, according to the Shanghai branch of the CBRC yesterday, citing a stress test based on Sept. 30 figures. A 30 percent decline would cause the ratio to jump almost fivefold, the agency said. Fitch Ratings said Dec. 17 that Chinese banks’ capital strength is probably more “strained” than it appears as lenders use more off-balance sheet transactions to make room for loans. It was the first time the CBRC announced estimates for how much a property-market slump in Shanghai would hurt banks, underscoring the government’s concern that real-estate speculation may spur bad debts.
- The cost to protect Bulgarian debt from default rose to a five-month high and Serbia yields jumped the most since July as analysts said the economies are among the most vulnerable to lower investment because of Greece’s crisis. Credit-default swaps on Bulgaria’s debt climbed 13 basis points to 270, the highest level since Aug. 21, according to CMA Datavision prices. The extra yield investors demand to own Serbian foreign-currency bonds over U.S. Treasuries rose 23 basis points, the most since July 14, to 4.06 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index. Greek lenders, whose subsidiaries account for about 30 percent of the banking system in Bulgaria and 15 percent in Serbia, may pull money from the countries if they face “liquidity shortages” because of Greece’s struggle to finance its budget deficit, Timothy Ash, a strategist at Royal Bank of Scotland Group Plc, said in an e-mailed note today. Serbia and Bulgaria may be “vulnerable” to a decline in investment from Greek companies, wrote UniCredit SpA economist Matteo Ferrazzi. “With Greece being caught in the headlights at the moment, market attention inevitably turns to contagion risk across the region,” wrote Ash, the London-based head of emerging-markets research at RBS.
- Instituto de Credito Oficial was forced to sweeten terms in its sale of Spanish government-backed bonds, while Italy’s Snai SpA pulled a high-yield offering as the rising risk that a European nation will default spooked investors, driving corporate debt sales to the lowest all year. The pushback in Europe is forcing borrowers to curtail their financing plans as investors become choosier about the bonds they buy on concern governments including Greece, Spain and Portugal will struggle to fund their budget deficits. Sales total 8.5 billion euros this week, a 9 percent decline from the previous period, while high-yield issuance ground to a halt for a second week, according to data compiled by Bloomberg.
- In less than a year as head of the Securities and Exchange Commission’s enforcement division, Robert Khuzami has led the agency’s biggest overhaul in at least three decades. This year will show whether he succeeded in restoring the SEC’s credibility as Wall Street’s sheriff. Khuzami dismantled agency hierarchies, expanded his investigators’ legal powers and created five specialized task forces. Today, as the 53-year-old former federal prosecutor and Wall Street attorney speaks at the SEC’s biggest annual legal conference in Washington, hundreds of lawyers for banks, brokers and hedge funds will watch for signs that big cases are coming.
- The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said. “The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today. The U.S. and U.K. “have similar issues to those facing peripheral Europe but have the luxury of a flexible currency up their sleeves as a first defense if the market wants to attack them,” Reid said. “Such a defense means that the market, for now, thinks there are easier targets.” Moody’s Investors Service said in December its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries.”
- About 30 banks including BNP Paribas SA and Rabobank Nederland NV are being lured back into financing “sexy” U.S. renewable energy projects following an $80 billion government investment in the industry, a project manager said. Debt financing may return to the 2008 level of about $6 billion in 2010, after falling to $3.2 billion last year, as banks lend more to wind and solar energy projects in the U.S., said Bruno Mejean, a managing director in New York at Norddeutsche Landesbank Girozentrale AG, a state-owned German lender. “Most banks shut down in the first half of last year,” Mejean told attendees at a renewable energy conference in Washington. “This year they realize that they have to make money after all, so they are opening the spigots and deploying capital primarily to this sexy space.”
- Hedge-fund billionaire John Paulson’s gold fund lost 14% in January, its first month of operation, two investors said.
- Federal Reserve Chairman Ben S. Bernanke plans to testify before the House Financial Services Committee on Feb. 10 about the central bank’s plans to withdraw emergency stimulus from the U.S. economy, according to a committee memo to lawmakers on the panel.
- Chinese Foreign Minister Yang Jiechi said his country shouldn’t be blamed for cyber attacks on Google Inc. e-mail accounts that led the search- engine company to threaten an end to operations in China. “I don’t know how come this Google thing has popped up,” Yang said in remarks at the Munich Security Conference today. “We are against hacking attacks.” Companies that choose a “wise path” succeed in China, he said.
Wall Street Journal:
- Crude oil futures moved decisively lower before noon Friday after trading sideways following the morning release of U.S. January jobs data that showed the unemployment rate unexpectedly falling to 9.7%. Crude futures moved sharply lower after breaking through $72.43 per barrel, which was the January low and a key "support" level traders had been watching for a signal of whether the market would continue to trend lower following a steep drop Thursday that briefly touched the January low level. Light, sweet crude for March delivery dropped recently trading $3.01, or 4%, lower at $70.13 a barrel on the New York Mercantile Exchange after briefly dropping below $70 a barrel. Brent crude on the ICE futures exchange traded $3.58 lower at $68.55 a barrel. "The market is hovering over yesterday's lows, which is a very important support level," said Andy Lebow, an analyst at MF Global in New York, before the market broke through the low levels. Lebow noted that the market had tested the low four times in last several days. "If we bust through that we could see some strong selling pressure," Lebow said.
NY Times:
NY Post:
- Absence may make the heart grow fonder, but in the case of GMAC's lending unit Ditech, it's made some people worry. Ditech, which for years has been an active advertiser across many media platforms, has suddenly clammed up as government-controlled GMAC slashes costs across the board. "They have not advertised for almost two months," a Ditech employee told The Post. "I have been there for over 10 years, and I have never seen this before." Uncle Sam got a 56 percent stake in GMAC on Dec. 30 after it spent $16 billion rescuing the company, which in addition to offering mortgages is a major auto lender, and at one point was the main finance arm of General Motors. Sources said the feds have taken a hard line at GMAC, demanding it slash costs in the face of a ballooning federal deficit and mounting losses at GMAC itself. Indeed, the company this week reported a record $3.9 billion, fourth-quarter loss, in part reflecting a $2.6 billion writedown in its mortgage portfolio.
Washington Post:
The Business Insider:
BusinessWeek:
- Gold fell to a three-month low in London as the dollar’s rally cut bullion’s appeal as an alternative investment. Other precious metals slid. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, climbed to a six-month high on concern widening budget deficits will stifle Europe’s economic recovery. Gold, which typically moves inversely to the U.S. currency, dropped the most in 14 months yesterday and is set for a fourth weekly decline. “People are very uncomfortable with the euro,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “If liquidation continues,” bullion may retreat to around $1,025 an ounce, he said.
FINalternatives:
SeekingAlpha:
- Sovereign Debt Default Risk. (table)
ABCNews:
Politico:
- Moderate Democrats, coping with the electoral fallout of President Barack Obama’s grand and ground-down legislative ambitions, have a message for their leaders: Stop supersizing us. If the first year of Obama’s term was dominated by the so-called Big Bang push for enormous, politically risky initiatives — the stimulus, cap and trade and health care — Year Two is fast shaping up to be year of small ball, retrenchment and backlash. “I’ve always maintained that I thought that they were doing too much, too fast,” said Rep. Mike McMahon (D-N.Y.), an endangered freshman who represents a Staten Island district long occupied by Republicans.
FinancialNewsOnline:
- Top 50 women in hedge funds.
Reuters:
- One of Bob McDonald's biggest concerns after seven months at the helm of Procter & Gamble Co (PG) is the possibility that President Barack Obama's administration could stifle U.S. corporate growth by imposing taxes on companies' foreign earnings. "I am really worried about the United States ... more worried than I've ever been in my career," McDonald, chairman and chief executive of the world's largest household products maker, told Reuters in an interview at his company's Cincinnati headquarters. "I worry about the deficit, I worry about an uncertain future." McDonald, a member of the U.S. Advisory Committee for Trade Policy and Negotiations who visited Washington, D.C. last weekend, said he has told government officials that they must "create greater certainty for business." Consumer sentiment in the United States "is getting a little bit better, but it is uneven," McDonald said. The question that remains is how much of consumers' return to purchasing has been driven by government stimulus spending rather than underlying growth, he added. Companies large and small have shown reluctance to hire even though the economy has been growing for two quarters, and many economists think that reflects uncertainty about the pace of the recovery and policies coming out of Washington. High on the worry list are how much it will cost to provide health insurance for workers if Congress passes a healthcare reform bill, and what will happen to corporate tax rates. McDonald, a straight talker, was quite clear how he felt about whether Obama should tax U.S. companies' foreign earnings as he tries to create U.S. jobs and improve exports, saying it "would be a dumb thing to do" as it would make U.S. companies less competitive versus foreign ones. McDonald has broached such issues with U.S. Treasury Secretary Timothy Geithner, White House economic adviser Larry Summers and White House adviser Valerie Jarrett, who he said are open to listening to ideas. "But then you see the same proposal cobbled together a different way," McDonald said. McDonald said that 20 percent of his company's U.S. jobs are dependent on its international business. In its home state of Ohio, that percentage jumps to 40 percent. "The point is business needs certainty, or as great a certainty as it can get, if you want business to hire more people. And there's a lot of uncertainty out there today with this administration," McDonald said. "They're not pro-business in general." P&G's Good Government Committee PAC contributed $355,000 to federal candidates during the 2008 election cycle, according to the Center for Responsive Politics. Of those funds, 65 percent went to Republicans and 35 percent went to Democrats. So far in 2010, 53 percent of its $147,000 in contributions have gone to Democrats and 47 percent went to Republicans.
Financial Times:
Maeil:
- South Korea’s government joined the race for a share of the $40 billion high-speed rail project in California, citing nation’s Ministry of Land, Transport and Maritime Affairs. Korea will sign a memorandum of understanding with the Californian state governmetn
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