Hope yet for creditors in China property-bond saga 28 May 2015 Defaulting developer Kaisa has lost white-knight bidder Sunac. That leaves foreign bondholders dealing with the company’s discredited chairman. However, China’s real estate market is recovering. The Shenzhen-based company may even be able to hammer together a better deal.
Britain could offer China ultimate FX sacrifice 27 May 2015 The IMF is likely to recognise China’s global clout with a place in its pseudo-currency. The UK, which is courting the rising power, no longer merits a place in the SDR basket. It could offer its place to Beijing. Currency obscurity would be a fair price for enduring gratitude.
China’s margin trading boom nears its limits 27 May 2015 Investors have pumped up mainland stock markets with more than $300 bln of borrowed money, prompting brokers to scramble for extra capital. But leverage is already high, while the number of eligible new customers is finite. Securities firms need more durable sources of income.
Japan’s flood of foreign M&A hits Chinese blockage 26 May 2015 Lixil’s China-focused unit Joyou is set to file for insolvency. Though the financial hit is tolerable, this embarrasses both the $6 bln sanitaryware giant and authorities in Germany, where Joyou traded. It also shows the risks in Japan Inc’s frantic overseas dealmaking.
Japan lesson on China debt: extend, don’t pretend 25 May 2015 Asking Chinese banks to roll over loans to local governments is reminiscent of 1990s Japan, where lenders choked good borrowers to keep zombies alive. The real mistake wasn’t extending losses into the future, but pretending banks could lend to everyone else without more capital.
HP’s China deal extracts harmony from awkwardness 22 May 2015 Selling 51 pct of its Chinese networking unit for $2.3 bln to a state-owned company looks like a partial retreat from an unfriendly market. But the U.S. tech giant now has a powerful ally with deep ties to Beijing. Rivals from Cisco to Microsoft should consider similar matches.
Mystery sell-offs test Hong Kong at crucial point 21 May 2015 Regulators are probing Hanergy, whose $40 bln value halved in a morning. Two once-hot stocks backed by Goldin Group have also plunged. Hong Kong wants to act as a gateway to China for global investors. So maintaining a transparent, orderly market is more important than ever.
Yahoo tax distraction accentuates bigger challenge 20 May 2015 Worries that the IRS may block the company’s mooted spinoff of a $34 bln stake in Alibaba sent Yahoo shares tumbling. The reaction suggests the U.S. internet grab-bag is still largely defined by the Chinese e-commerce giant, not what CEO Marissa Mayer is trying to build.
Weibo investors should weigh life without Alibaba 19 May 2015 An alliance between the Chinese microblog and the country’s largest e-commerce group is set to expire in January. For the loss-making Weibo, the partnership hasn’t been as transformative as hoped. Instead, the microblog’s value relies ever more on factors beyond its control.
China’s lodestar is not reform but avoiding chaos 18 May 2015 The authorities want banks to show mercy to stressed local government-linked borrowers. The plan seems to be to avoid chaotic deleveraging. Though it’s a step back from reform and market forces, until a clear line has been drawn between good and bad, it’s the right thing to do.
HSBC in 2020: An imagined letter to shareholders 15 May 2015 Moving its head office to Shanghai marks a new era for the bank, writes chairman Hank Paulson in a make-believe memo. However, despite escaping hostile regulators in the aftermath of Britain’s divorce from the European Union, HSBC faces many challenges, both familiar and new.
China’s housing recovery is mind over market 14 May 2015 Sales grew in April following more than a year of decline. After rate cuts and mortgage loosening, buyers seem to believe prices will rise again. Developers are also doing their bit to stimulate demand by offering new projects. That creates problems for them in the longer term.
Alibaba entrée into U.S. is not so far fetched 14 May 2015 The Chinese e-commerce group denies plans to enter Amazon’s home turf. A growing list of U.S. investments, from retailer Zulily to Snapchat, sends a different message. Picking up expertise is useful, but as a stealthy approach to U.S. expansion, these deals may have a longer-term payoff.
U.S. trade setback more diplomatic than economic 13 May 2015 Senators denied President Obama authority to negotiate a new Pacific trade pact. The squabbling contrasts with China’s success in organising its infrastructure bank. But the benefits of both projects are uncertain. The world economy can shrug off the blow to America’s leadership.
China debt swap lays ground for greater reckoning 13 May 2015 Officials are finalising a plan to replace local authority loans with bonds, which lenders can use to borrow from the central bank. It won’t shrink the 16 trln yuan ($2.6 trln) tower of local government debt, but should stop good loans getting in the way of dealing with the bad.
China’s new monetary tool: quantitative teasing 11 May 2015 Cutting interest rates, as the central bank just did, can ease pressure on some borrowers, but won’t do much more. Making money more abundant, rather than just cheaper, would be a more decisive move. For now the government is wisely keeping its powder dry.
Alibaba generation shift treats investors as kids 8 May 2015 The e-commerce group is swapping its chief executive for a younger insider. The plan was drawn up before the company’s IPO. Yet Alibaba has offered no explanation. Founder Jack Ma wants to promote young leaders, but investors deserve adult answers on who makes decisions and why.
Alibaba owners: be careful what you wish for 7 May 2015 The $220 bln Chinese e-commerce group turned in better-than-expected numbers for the quarter to March, sending shares up 10 pct. The trouble is, that’s enabling forays into unrelated businesses which are eating into margins. Jack Ma’s creation is not for fretful investors.
IPO exuberance could jeopardize China rally 7 May 2015 The 6 pct fall in Shanghai stocks in four days could be sobriety setting in. More likely it’s due to investors pulling out funds to bet on new offerings. Eye-popping levels of demand suggest speculation still burns bright. Yet if it saps broader prices, confidence may evaporate.
Yum Brands China split short on crispy goodness 6 May 2015 Activists have turned the hotlamp on the KFC parent’s China arm. It could be worth $20 bln if diners forget past safety scandals, a Breakingviews calculator shows. To justify more, Yum must expand rapidly, but pitching into China’s poorest cities brings risk as well as revenue.