Showing posts with label FT. Show all posts
Showing posts with label FT. Show all posts

Saturday, July 19, 2014

19/7/2014: Trueconomics Cited in FT


Delighted and proud that FT is quoting the blog on European banks woes: http://www.ft.com/intl/cms/s/0/de39b744-0e61-11e4-a1ae-00144feabdc0.html#axzz37pQsLLmF


July 18, 2014 1:03 pm

Reality check for European banks

Constantin Gurdgiev at True Economics says while current monetary and investment climates remain supportive of lower yields, markets are starting to show an increasing propensity to react strongly to negative newsflows. Investors’ view of the peripheral states as being strongly correlated in their performance remains in place, especially for Spanish, Portuguese and Greek sovereigns and corporate issuers.

“The markets are jittery and are getting trigger-happy on sell signals as strong rises in bond prices in recent months have resulted in sovereign and corporate debt being overbought by investors,” says Mr Gurdgiev.

Nice birthday present for myself. Thanks, FT!

Saturday, April 19, 2014

Wednesday, August 28, 2013

28/8/2013: Some charts on China's debt addiction (via FT)

China has been the 'Big Asian Hope' when it comes to global growth and more recently, the 'Big Asian Worry'. The problem, however, is that China is not unique. Like the rest of the world, China is incapable of delivering growth at the rates below the rate of expansion of debt. Leveraging seems to be the worldwide story when it comes to growth generation, as if the entire global economy is populated by compulsive gambler-states...

FT has a fascinating set of slides on China's debt-growth links: http://www.ft.com/intl/cms/s/0/e76db82e-0a4d-11e3-aeab-00144feabdc0.html#slide0

And here are my two favourites:


Chart above clearly shows that China is in a league of its own when it comes to debt vs GDP per capita. If anything, the healthy due of countries by these metrics are Russia and Mexico (note South Korea, in my opinion, does not belong with Emerging Markets - it is an advanced economy). India is a sick economy, compared to the rest. But China... well, China is on its own.

Worse, however, as the chart below shows, China's mountain of debt is now shifting out of the banking sector and into the least transparent and trust loans markets:


Now, trust loans are debt that has been dressed up as 'investment product' and sold onto retail investors. This debt is funded usually by banks and/or investors. Back in 2010 these were problematic already, but arguably manageable. Since then they have shot up in importance. Trust loans are short-term finance, with maturities of few months and up to a year, implying high risk of exposure to liquidity shocks and interest rates shocks. They are also expensive. Roll over risk is rising in the Chinese economy.

FT had additional coverage on these back in 2010 here: http://ftalphaville.ft.com/2010/07/15/286766/chinas-trust-factor/

All of the above speaks of severe debt addiction in the Chinese economy.