China: Shadows Make Bad Banks Not So Scary, Interbank Lending Gets a Bump
The Chinese Government has said it would like to see the whole “Shadow Banking” thing go away. Go away, it is not (as Yoda would say): “New local-currency loans were 624.6 billion yuan ($103 billion) [last month] compared with the 580 billion yuan median estimate of 41 analysts surveyed by Bloomberg News. Aggregate financing was 1.23 trillion yuan, topping all economists’ estimates, while M2 money supply increased 14.2 percent from a year earlier.” So China is doing what China does: “China will strengthen scrutiny of local-government borrowing and use it as an ‘important indicator’ for regional officials’ performance reviews…People should be punished for decisions that ‘result in huge losses to the country.’” Meanwhile, investors feel pretty good about what shadow banking is going to do for the “bad banks” in China: “shares in the state-run ‘bad bank’ China Cinda Asset Management rose as much as 33 percent on their trading debut in Hong Kong on Thursday.” What makes Cinda a “bad bank” you ask? Cinda “is one of four asset managers set up by the government to bail out banks by taking bad loans off of their books. When borrowers fail to repay their loans to banks like Everbright (IPO coming soon), Cinda makes money by acquiring those debts at a discount and recouping its outlay by extracting cash, shares or other assets from the borrowers. In effect, the Cinda IPO represents a bet that a slowdown of the Chinese economy will create a new wave of bad debt.” Also, “Chinese banks’ funding constraints are set to ease after policy makers authorized the sale of certificate of deposits in a move toward loosening control over interest rates in the world’s second-largest economy.” The negotiable certificate of deposits (NCDs) will be priced by trading on the Shanghai Interbank Offered Rate. NCDs may “offer a fresh avenue to raise money for the banks most dependent on interbank borrowing.”
Change: Samsung Moves to Vietnam, Facebook Joins S&P 500 and Toyota Wants To Sell Some Cars
The times are a changin’ for global manufacturing: Samsung Electronics is “shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows.” Samsung expects 40% of their phones to be produced in their new $2bn Vietnamese factory. Samsung joins the likes of Intel, Nokia and LG Electronics to tap into Vietnam’s attractive labor force: cheap, young, well-educated and understand “what it takes to rebuild an economy after a devastating war”…yes, LG went there. Meanwhile, the S&P 500 is giving in to these damn kids with their rock n roll and their social media: Facebook will join the S&P 500 at the close of trading next Friday. The social media giant will replace Teradyne, a testing equipment firm whose website looks like it wouldn’t know a “status update” from a “tweet.” Speaking of the young: Toyota’s interactive showroom in Tokyo is getting a kiddie makeover in an early effort to attract future customers. It “features an electric vehicle driving course for kids and a driving simulator in which a tablet computer serves as the steering wheel.” Toyota is changing up its playbook as the older twentysomethings are increasingly more inclined to ride the train rather than buy a Toyota.
Attention Jamie Dimon and Others: The United States Government Doesn’t Like Money Laundering
JPMorgan is closing in on a settlement with the United States Government (dejavu anybody?) for “turning a blind eye to [Bernie Madoff’s] huge Ponzi scheme.” Dimon and crew will probably see their $13bn tab increase to $15bn on a “deferred-prosecution agreement…expected to fault JPMorgan for a ‘programmatic violation’ of the Bank Secrecy Act, which requires banks to maintain internal controls against money laundering and to report suspicious transactions to the authorities.” Apparently JPMorgan isn’t just “Too Big To Fail” but also “Too Big To Jail.” Not so, says United States attorney Preet Bharara: “I don’t think anyone is too big to indict – no one is too big to jail.” While it may seem like JPMorgan is hogging all the legal spotlight for big banks these days, the Royal Bank of Scotland is getting some attention today: RBS will pay $100mn to settle accusations “that some of its former employees helped conceal transactions involving customers from Iran, Sudan and other nations subject to international sanctions for about a decade.” This is part of a “crackdown on banks that violate American laws against money laundering.” Regulators are reportedly working with about 6 other banks over similar violations.
The Commerce Department: Retail sales increased 0.7% last month, the largest gain in five months. So you’re thinking “Yeah, OK. Cyber Monday and Black Friday” and all that. Good point. But maybe not. “Gift” sales (include: electronics, clothing, department stores etc., exclude: gas stations, restaurants etc.) were up about 2.8% in November from last year, down from about 4.7% increase. Then again, considering the 6% drop in 2008, maybe we’ve recovered the lost ground?