China’s jobless recovery risks debt indigestion 16 Jul 2020 Output rose 3.2% last quarter, as a record $1.7 trln in loans kicked in. But investment is tepid, employers are shedding jobs, and retail remains anaemic. Beijing is also running low on distressed credit buyers. With bad debt set to rise, pressure to find alternatives will build.
Argentina remains the bad boy of sovereign debt 14 Jul 2020 The serial defaulter’s new restructuring proposal offers creditors decent value – but only after months of off-the-charts acrimony. Creditors were a tough bunch to please, but the government’s strategy stymied progress. The country can’t get out of its own way.
Corona Capital: Lockdown diets, Beating the Fed 14 Jul 2020 Concise views on the pandemic’s corporate and financial fallout: Covid-19 is prompting diets for both animal and human; and the Fed takes a hit on a garbage deal.
India’s banks peddle bad-loan black holes 14 Jul 2020 ICICI wants to raise some $2 bln, joining peers seeking capital as customers take advantage of interest holidays on a huge one-third of borrowings. Defaults system-wide could double to a whopping 20%, or worse. Amid so much disarray, the strong will inevitably get stronger.
Review: Poking China’s ironclad asset bubbles 10 Jul 2020 Sceptics have predicted the financial implosion of the People’s Republic for years. In “China: The Bubble that Never Pops”, Tom Orlik argues it may never happen. It’s a useful antidote to free-market complacency. Beijing’s competitive threat will not go away on its own.
Indonesia cautiously crosses central bank rubicon 9 Jul 2020 Bank Indonesia will buy $28 bln of bonds directly from the government, breaking a long-held taboo. It will refund interest gains, and the securities will be tradeable, providing price transparency. That’s about as credible as an emerging market monetary authority can hope to be.
Japanese bond market shift spells stronger yen 7 Jul 2020 Central bank boss Haruhiko Kuroda has kept yields on 10-year debt near zero but let those on longer-dated ones rise. Now most of Japan’s yield curve is above that of France. Dwindling returns on overseas bonds could reduce local demand for foreign currency, sparking a yen rally.
Mexico’s stingy populist is haunted by history 2 Jul 2020 The president, known as AMLO, is the rare left-winger queasy about budget deficits, even in the face of a pandemic. This may be because of his nostalgia for the country’s mid-century boom, which was undone by debt-fueled spending. He has learned the wrong lessons from the past.
Argentina drama comes down to politics and Pac-Man 22 Jun 2020 Talks between the serial defaulter and its largest creditor group have stalled. The remaining gap is not huge. But the government seems intent on scoring a political win and may deploy an unusual strategy to do it. Rising frustrations may make an agreement hard to reach.
FOMO draws a crowd to Reliance’s Jio club 19 Jun 2020 Mukesh Ambani has delivered on a promise to make his group net-debt free after raising $22 bln. Most of that came from selling pricey stakes in tech unit Jio to KKR and others. A fear of missing out on India’s next big thing will have helped. Still, the frenzy is rational.
Corona Capital: UK debt, Oaktree, KKR, Chanel 19 Jun 2020 Concise views on the pandemic’s corporate and financial fallout: UK government borrowing surges past GDP; Howard Marks is sceptical about the stock market revival; KKR bets on cheap and local European holidays; Chanel takes a gloomier view than rivals on the luxury rebound.
Hadas: Virus debt will leave toxic residue 17 Jun 2020 Corporate borrowing breaks down when revenue dries up. Yet companies are taking on more leverage to survive the Covid-19 slowdown, inhibiting future growth. Ultra-low interest rates reduce the pain but bring other risks. There’s no safe way to recover from the debt overload.
China’s Zambia debt problem is Africa-sized 15 Jun 2020 Beijing-backed lenders are owed nearly a third of the African state’s $10 bln external debt pile. They will be under pressure to share in any restructuring pain. Caving in will set a precedent across a continent that has borrowed $146 bln from China in the last two decades.
Italy gives sovereign debt revolution a nudge 12 Jun 2020 The country will sell bonds whose payout is linked to how GDP evolves. It’s a first step that only targets domestic savers. But cultivating an international market for such securities could help countries, particularly ones locked into the euro, to better weather economic shocks.
Argentina gets too cheeky with its creditors 8 Jun 2020 The serial defaulter wants to put its restructuring to a creditor vote, but leave room to decide later which votes count and which don’t. That would require a tweak to a common clause designed to make bond negotiations simpler. Emerging-market borrowers would be worse off for it.
Kotak cash call shows India Inc’s fear and greed 28 May 2020 A well-subscribed $1 bln share placement is sufficient to defend the richly valued lender against credit-quality doomsday. Barring that, it’s a massive war chest for acquisitions. Boss Uday Kotak, Asia’s richest banker, is prepared for both deep disruption and deep discounts.
Europe has way out of Covid corporate debt trap 27 May 2020 Germany, Britain and France have approved $140 bln in state-backed loans to firms. As that number rises, so does the risk of a damaging debt overhang. Linking repayments to profit, so that some companies pay nothing, would help forestall that growth-sapping scenario.
Guest view: Debt crisis will delay global recovery 25 May 2020 The world is facing an emerging market blowup of unprecedented breadth that will damage confidence in the international financial system, former Citibank Chairman William Rhodes and Stuart Mackintosh argue. Easing the blow requires the United States and China to work together.
Debt hero role awaits China at rich price 21 May 2020 Beijing has deferred loan payments from poor countries, but with over $900 bln in IOUs from emerging markets, officials are hesitant to do more. China’s banking opacity deters cooperation. If it wants to seize leadership, it will have to come clean.
African debt holiday choices open new divisions 20 May 2020 Kenya won’t take up a G20-backed offer to poorer nations to suspend debt repayments. That’s because private creditors may take a dim view of such a move, irrespective of what ratings agencies say. Africa’s laggards have to accept the offer and will look worse in comparison.