FacebookInstagramTwitterContact

 

BORNEO HOUSING AGENCY: Terrace House in Bengkurong (B$190K, Property Chinese Owned) • Industrial Warehouse in Menglait, Gadong for Rent • Shop house in Gadong (Ground Floor) for Rent • Industrial Shops in Bunut for Sale • Land in Jerudong for Sale • Shop house in Kiulap for Sale (44 years lease, approx 5,000.00 per month rental) • Chempaka Terrace House for Rent (3 bedrooms, B$700.00 per month) • Shop house in Kiarong for Sale (B$380.00) • TEL: +6738732975, +6738839007           >>           Fully furnished office space for rent at Regus Brunei. Call +673-886-2879 or go to www.regus.com.bn           >>           Private Company Urgently Need Houses & Flats for Rent in Bandar Seri Begawan, Kindly Contact the ff. nos. for further information: 242-7623/+673 883-9007           >>           Foreign Man Sentenced to Prison, Caning           >>           Mosque Holds Halaqah Zikir Ceremony           >>           Closing Of the 22nd National Scouts Camp           >>           World Meteorology Day Celebration 2017           >>           Presentation of Charity Fund and Government Assistance to Fire Victims           >>           Gas Leak at Berakas Power Station Under Control           >>           Brunei Citizens Are Confirmed Safe in London           >>           His Majesty Sends Congratulatory Message           >>           His Majesty Sends Message of Condolences           >>           Arsenal Ready Move For Arda; Man United's Mbappe Bid Knocked Back           >>          

 

SHARE THIS ARTICLE




REACH US


GENERAL INQUIRY

[email protected]

 

ADVERTISING

[email protected]

 

PRESS RELEASE

[email protected]

 

HOTLINE

+673 222-0178 [Office Hour]

+673 223-6740 [Fax]

 



Upcoming Events


Maritah ke LLRC, 22 - 26 March
March 22nd, 2017 | 10:00 AM


Ramshackle
March 25th, 2017 | 19:30 PM


Axelle Red Acoustic Performance
March 26th, 2017 | 20:30 PM


SCA Nike FZ Basketball Camp
March 27th, 2017 | 00:00 AM


SCA Nike Football Camp
March 28th, 2017 | 00:00 AM





Prayer Times


The prayer times for Brunei-Muara and Temburong districts. For Tutong add 1 minute and for Belait add 3 minutes.


Imsak

: 04:56AM

Subuh

: 05:07AM

Syuruk

: 06:23AM

Doha

: 06:45AM

Zohor

: 12:28PM

Asar

: 03:34PM

Maghrib

: 06:31PM

Isyak

: 07:40PM

 



The Business Directory


 

 



World Business


  Home > World Business


China’s Great Ball of Money Has More Bubbles in Sight for 2017


Photographer: Feng Li/Getty Images

 


 January 12th, 2017  |  09:03 AM  |   394 views

CHINA

 

Call it China’s Great Ball of Money, Whac-a-Mole Finance, or simply a whole lot of liquidity. Whatever term you use for the excess credit trapped in China’s financial system, few would deny that predicting its sometimes erratic movements can be a money-maker for analysts, traders and investors.

 

After a string of market bubbles in recent years, China will again see assets threatened in 2017 by prices detaching from fundamentals.

 

That’s the opinion of all but one of 14 economists surveyed by Bloomberg late last month. Half penciled in the risk of a real-estate bubble inflating, despite efforts by policy makers in recent months to avoid exactly that outcome. An additional four saw the corporate bond market as most vulnerable to becoming a bubble, again even as officials take steps to raise costs and reduce a build-up in debt.

 

 “It’s a very challenging task of balancing the need to reduce leverage and to maintain a certain growth rate, while ensuring the stability of the financial system,” said Teck Kin Suan, senior economist at United Overseas Bank Ltd. in Singapore. “Liquidity that remains in the system would still have to look for returns, and the reduced opportunities to invest overseas could exacerbate the asset bubbles.”

 

Regulators the world over struggle to head off irrational exuberance. Making things all the tougher for China are the increasingly tight capital controls limiting the money that can be invested abroad. That leaves a large stockpile of cash seeking a home in domestic assets.

 

And with a slowing economy and a still-powerful pace of credit growth, the money ball is only getting larger. The problem began, arguably, when the Communist leadership unleashed a record surge in credit to shore up the economy during the global crisis. The following series of charts tracks the progression of assets roiled since then.

 

First, a look at the growing size of the liquidity excess:

 

The blowout in credit initially came at the local-authority level, with provincial and municipal officials overseeing an explosion in the local government financing vehicles that became a poster child for China’s lack of transparency. Much of the money flowed into real estate, sparking a boom in prices, especially in the largest cities. Wary about affordability and potential social unrest, Beijing has periodically moved to rein in its property industry, only to relax again when economic-growth targets came under threat.

 

The state also had a hand in an epic equity bubble -- a surge that saw the benchmark CSI 300 index more than double in about eight months. As property prices were coming down in mid-2014, official media encouraged investors to put money in stocks. While state media later adopted a cautionary tone, People’s Bank of China Governor Zhou Xiaochuan extolled the stock market for serving as a channel for companies to raise funds -- speaking less than three months before the market collapsed.

 

Other bubbles have had more of a random quality to them, akin to the tulip-bulb craze that hit the Netherlands in the 17th century:

 

There was what one former U.S. Treasury official deemed the “great garlic bubble” that kicked off in late 2009. By May 2010, the national planning agency was blaming speculative funds for what state media said was a more than tripling in garlic prices within weeks. Another favorite foodstuff at the time: mung beans.

 

Later in 2010, the soaring prices of items from art to particular types of tea spurred economist Patrick Chovanec to warn about excess money growth.

 

In more recent years, diamonds and fine wine saw their prices plummet as Chinese President Xi Jinping launched an historic anti-corruption campaign. Read about that here.

 

It’s harder to strip out evidence of leverage at work in the credit markets, as prices of assets such as corporate bonds are already seen as artificially inflated thanks to the perception of implicit government guarantees. Looking at one source of fuel for bets in credit -- outstanding repurchase agreements in China’s interbank market -- there’s plenty of reason for worry.

 

In commodity markets as well, policy makers have had to intervene with stricter rules as signs of speculative excess emerged. But reining in risk-loving spirits can be difficult, and once regulators have driven down one bubble another one tends to pops up. Transaction fees for thermal-coal futures were the preoccupation of Beijing’s bureaucrats in September. A welter of further steps have been taken, including higher fees placed on some trading by the Shanghai Futures Exchange.

 

What will 2017 bring? While authorities have taken measures to curb speculative lending in money markets, only one of the 14 Bloomberg survey respondents said there was no material bubble risk in Chinese assets this year. Yet even that analyst -- Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong -- added the proviso that he was defining bubble as a market that bursts in 2017.

 

“None of the asset classes would crash by end-2017,” Hu said. “Small-cap stocks are most vulnerable,” he added.

 

It’s not just Chinese investors with interests at stake in the health of China’s markets, as disruptions there have had an increasingly nasty habit of reverberating round the world. Frederik Kunze, chief economist for greater China at the state-owned German lender Norddeutsche Landesbank, worries about Chinese fixed-income.

 

“Growing debt levels of Chinese corporates might become a major concern of international financial markets,” said Kunze, who in the survey regarded a bubble in company debt as “somewhat likely” this year. “The overall effect on the Chinese economy should also not be overestimated,” he said.

 


 

Source:
courtesy of BLOOMBERG

by Chris Anstey , Cynthia Li , and Narae Kim

 

If you have any stories or news that you would like to share with the global online community, please feel free to share it with us by contacting us directly at [email protected]

 

Related News


30 Tourist Boats Compounded — MMEA

 2017-03-23 09:06:03

North Korea Hunger: Two In Five Undernourished, Says UN

 2017-03-23 08:24:25

In Asia's Infrastructure Race, Vietnam Is Among The Leaders

 2017-03-23 09:26:59