Australian (ASX) Stock Market Forum

End of the China bull?

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skc said:
This is something to keep a close watch imo.

http://www.bloomberg.com/news/2014-...oubled-china-trust-product-official-says.html

Another link to the same story
http://www.forbes.com/sites/gordonchang/2014/01/19/mega-default-in-china-scheduled-for-january-31/

Chances are there will be a bail out of the investors in that particular product, as the risk / cost of a mass exit in other products would be much much worse. But if too many more of the blows up then it might be impossible to keep a lid on.
Click to expand...

Looks like they rescued that trust.

As speculation mounted over recent weeks that the trust would fail, leaving its 700 investors out of pocket and marking the first default of its kind since 2005, China was headed for an inauspicious start to the Year of the Horse. Some predicted the first domino would fall in a cascade that would cripple China’s financial system. And so it became the $560 million bad loan that nearly brought a $10 trillion economy to its knees.

But in the end disaster was avoided. China Credit Trust announced on Monday it had struck a deal with investors to restructure the high-yield product. Not everyone is cheering.

This was supposed to be the test-case for China’s much-talked about shadow banking sector and there were many market watchers who believed it was time for regulators to let one of these wealth management products fail. After all, if China is looking to reform its financial sector, it needs to let the market price risk.
Click to expand...

http://www.afr.com/p/world/trust_rescue_bad_omen_for_shadow_gjngvtNHGbeQpVGBlcQxyJ

Oh well, at least you can say that China is not a true capitalist market anyway.
 
Secular trending.........down.......and out?

MW-BW302_china__MG_20140310140159.jpg
 
many market watchers who believed it was time for regulators to let one of these wealth management products fail. After all, if China is looking to reform its financial sector, it needs to let the market price risk.
Click to expand...
Many still haven't figured out that the regulators are the ones having their wealth managed! It's back door 'tax the people,' to insure the funds which pay 'the shadow regulators' excessive interest. Let's get some overseas before it all falls over. Apartments in Australia look OK.
 
skc said:
Looks like they rescued that trust.
Click to expand...

Further to the story here there was a new one... the first public bond default of a solar company.

http://www.reuters.com/article/2014/03/11/china-copper-financing-idUSL3N0M83M320140311

China's first domestic bond default has shaken the foundations of the copper market, stoking investor worries that financing deals that have locked up vast quantities of copper could unravel.
Click to expand...

The default on a bond payment by China's Chaori Solar last week signalled a reassessment of credit risk in a market where even high-yielding debt had been seen as carrying an implicit state guarantee. On Tuesday, another solar company announced a second year of net losses, leading to a suspension of its stock and bonds on the Shanghai stock exchange and stoking fears that it, too, may default.
Click to expand...

It is difficult to appreciate the impact from this... it may be stand alone corporate default which means absolute nothing to worry about. Or it may be the "first cockroach" like those early Bear Stern funds.
 
skc said:
It is difficult to appreciate the impact from this... it may be stand alone corporate default which means absolute nothing to worry about. Or it may be the "first cockroach" like those early Bear Stern funds.
Click to expand...

I think it is a good thing, brings risk back onto the table and just a normal part of a functioning financial market. Winners and losers.
 
skc said:
Further to the story here there was a new one... the first public bond default of a solar company.

http://www.reuters.com/article/2014/03/11/china-copper-financing-idUSL3N0M83M320140311





It is difficult to appreciate the impact from this... it may be stand alone corporate default which means absolute nothing to worry about. Or it may be the "first cockroach" like those early Bear Stern funds.
Click to expand...

That was responsible for the gap down Monday wasn't it?

That's a massive default, but these guys have been subsidized for ages. I agree that this one is a good one. IT seems that are starting to let some of the bad businesses fail while wanting to attract private investors for the better SOE's.
 
The move to open private banks is also good.
But it's not going to be without pain and I'm not talking about a head ache or a saw thumb.
 
satanoperca said:
I think it is a good thing, brings risk back onto the table and just a normal part of a functioning financial market. Winners and losers.
Click to expand...

Sure. Anytime there's implicit guarantee risks get mis-priced. What we don't know is how much mis-priced risk there are... if there are lots of them, then there will be a massive adjustment period.

CanOz said:
That was responsible for the gap down Monday wasn't it?
Click to expand...

Probably in combination with the export data miss.
 
And have a look at the chart. Very similar to the meltdown in PMs a year ago.

Copper.gif

Right on the edge. :eek:
 
skc said:
It is difficult to appreciate the impact from this... it may be stand alone corporate default which means absolute nothing to worry about. Or it may be the "first cockroach" like those early Bear Stern funds.
Click to expand...

Here comes the second cockroach... Highsee Iron and Steel.

And the messgae from the government? Don't be surprised if you see even more cockroaches in the near future.

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Li Keqiang said on Thursday that China was likely to see a series of defaults as the government accelerates financial deregulation, although he added the government would take steps to ensure they do not pose a threat to the wider financial system.
Click to expand...

It feels like a controlled hardish landing. Let's hope they can get the descend done at the right pace.
 
skc said:
Here comes the second cockroach... Highsee Iron and Steel.

And the messgae from the government? Don't be surprised if you see even more cockroaches in the near future.



It feels like a controlled hardish landing. Let's hope they can get the descend done at the right pace.
Click to expand...

A bit of housekeeping perhaps...Jimmy Rogers would love it, let 'em fail!:xyxthumbs
 
skc said:
It feels like a controlled hardish landing. Let's hope they can get the descend done at the right pace.
Click to expand...

That would be a first.
Even for real market economy without BBQ'd books.
When they run out of thumbs to plug the little holes.
The hot air will be seen for what it is and the landing will be as graceful as the Hindenburg.
 
notting said:
That would be a first.
Even for real market economy without BBQ'd books.
When they run out of thumbs to plug the little holes.
The hot air will be seen for what it is and the landing will be as graceful as the Hindenburg.
Click to expand...

Name a real market economy without bbq'd books...:rolleyes:
 

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