China Trust Default Avoided…What Comes Next?


Forbes

A default of the “Credit Equals Gold #1” trust product has been avoided. What happens in the coming months will either push China closer towards a financial crisis or help it gradually step back from the edge.

The lack of details that emerged from the trust bailout will undoubtedly draw criticism from foreign investors and analysts alike. Industrial and Commercial Bank of China Ltd. told investors that they could sell the rights in the RMB 3 billion product issued by China Credit Trust Co. to an unidentified buyer at a price equal to the value of the principal. Separately, China Credit Trust announced that it had reached an agreement with a third party to sell the shares it had acquired in Shanxi Zhenfu Energy Group, the coal miner which took out the original loan. According to that statement, investors would not receive interest on the third and final year of the product, equivalent to around RMB 300 million. Neither ICBC nor China Credit Trust acknowledged where the funds came from to repay investors or who the third party was.

A Shanghai branch of Industrial and Commercial Bank of China, largest in the world. (Photo credit: Wikipedia)

A Shanghai branch of Industrial and Commercial Bank of China, largest in the world. (Photo credit: Wikipedia)

In reality, it is possible that we will never know the details of the third party. In 2012, there were two trust defaults, one for a product distributed by Huaxia Bank Ltd. and one sold by CITIC Trust. While we learned that Zhongfa Industrial Group in the end guaranteed the first, the solution to the second was never made public.

As a result of the uncertainty, we will now enter a period of second guessing on reform and concerns that risks in China’s financial sector will only intensify. As argued by Christopher Wood at CLSA:

“If there is a total bailout — or perhaps even worse a bailout through the backdoor as some speculate — it will be a signal that the government’s talk of pursuing reform isn’t perhaps for real. This will increase macro risks, with China’s trust assets now totaling more than 10trn yuan.”

China’ financial system is clearly under more stress than it has ever been given the large sums of money that are now invested in trust and wealth management products (WMPs), which in turn are used to extend loans to different segments of the economy. The degree of risk is unclear, however. China bears will argue that a vast majority of the trust loans cannot be repaid, which will eventually require substantial bailouts and lead to a collapse in the banking system and a larger economic crisis. Even if this is exaggerated and the assets are good, huge liquidity risks exist given the known mismatch between the duration of trust loans and their underlying investments.

This risk of a systemic crisis in the banking system was clearly the primary reason for the bailout. As Christopher Wood put it: “Risk facing authorities is that a default in which holders aren’t bailed out in full might precipitate panic outflows across the trust and related wealth-management product asset class, triggering a liquidity crisis, which would also ricochet into Hong Kong.”

A picture has also begun to emerge on what the scale of the crisis could have been this year. According to market estimates, around RMB 5 trillion of trust products mature this year with a peak of around RMB 1 trillion in May. If the China Credit Trust product was allowed to default, China’s financial system might have been sitting on hundreds of billions, if not trillions of yuan worth of non-performing loans in just a few months time.

While the worst case scenario has been avoided, the current outlook still isn’t great. Even though this default has been avoided, another liquidity squeeze such as the ones that occurred in June and December 2013 will certainly occur in May/June given the trust maturities. If interbank rates continue to spike every few months, it is clear that the People’s Bank of China (PBOC) will never succeed in turning the Shanghai Interbank Offered Rate (SHIBOR) into a pricing tool for credit instruments and that financial reform is essentially dead in the water.

Fortunately, regulators do not appear to be sitting idly by. Last week, in an apparent response to the current trust crisis, the PBOC and National Audit Office announced that they would soon begin an audit of shadow banking. The announcement follows the release of the local government debt audit in December that showed local government had become increasingly reliant on shadow banking to fund their investments, and the State Council 107 Document, also released in December, which called for greater regulation of shadow banking activities, including trusts and WMPs.

It is unclear when the shadow banking audit will finish, but it has the potential to mark a significant turning point in the ongoing trust/WMP saga. Despite the bailout this time, there were many in Beijing calling for a default of the trust product, recognizing the moral hazard that is created when the government bails out the market, allowing investors to continue to take riskier bets in expectation of future bailouts.

As this view is increasingly being held by individuals who can influence decision makers, more aggressive steps to curb shadow banking and risky trust bets are likely. It is possible, for example, that once regulators know the extent of shadow banking activities and how connected the formal banking sector is to the shadow banking sector, a managed default can be undertaken to teach investors a lesson in risk management and begin to adjust trust/WMP investment practices.

Foreign commentators on China always want a quick solution and bold moves, but this is not China’s way. In every segment of the economy, China takes things step-by-step. This approach has underpinned the remarkable growth China has achieved over the last three decades and is the embodiment of the statement by former Paramount Leader Deng Xiaoping that you should “cross the river by feeling the stones.” So we must therefore watch for incremental signs of change and hope that they are enough to prevent a catastrophe.

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Malaysian Tycoon’s Dream Bites The Dust: Does He Face Prison Time Again?


Forbes

Ch’ng faces 58 charges for insider trading in shares of his Malaysia Pacific Corporation

Ch’ng faces 58 charges for insider trading in shares of his Malaysia Pacific Corporation

Malaysian tycoon Bill Ch’ng Chong Poh, the former chief executive of Malaysia Pacific Corporation, had a dream. Long before Iskandar became Asia’s hottest property for real estate developers in Singapore, Malaysia and beyond, he bought 638 acres in the area. An architect by training, he conjured up a blueprint for a 4-million-square-foot development with an international exhibition center, resorts, a cultural showcase and even a cowboy-themed factory outlet mall replete with a sheriff’s office and stagecoach rides.

On Jan 10, the Securities Commission of Malaysia took him to task for his “cowboy” style—running roughshod over shareholders—and filed 58 charges of insider trading against him. He allegedly acquired the shares over three months in mid-2008, ahead of a joint venture with the state-run Amanah Raya Bhd for undertaking his dream Iskandar project. Ch’ng has pleaded not guilty. Repeated phone calls to his office went unanswered.

The events began to unfold last month, when a group of activist minority shareholders demanded a forensic financial audit into Malaysia Pacific’s accounts to weed out irregularities. They wanted more transparency and better corporate governance. Ch’ng resigned as CEO, handing over the reins to his son Charles Ch’ng, terming it a natural succession plan. If convicted, Ch’ng faces the prospect of up to 10 years in prison and a fine in excess of $300,000.

This would not be the first time Ch’ng would serve time for a white-collar offense. In July 1996, he was jailed for four years in Hong Kong for defrauding International Housing Development Ltd., where he was chairman, of $16 million. He had done it to fuel his dream of taking majority control of the company in 1985. With him in prison were members of the bank that co-conspired in the scheme. The prison term did nothing to dampen his ambition or curb his style.

Ch’ng has always fancied himself as a “white knight,” rescuing companies that “were ripe for takeovers.” He is widely perceived to have bailed out Singapore’s Emporium Holding in the early ’90s and was responsible for a string of takeovers during the same period. In an interview given to FORBES ASIA in 2009, he boasted that he was invited by Malaysian political allies and business partners to advise on corporate takeovers back home. And so he returned, after 22 years in Hong Kong. He said his “last major ambition” was to create Asia Pacific Trade & Expo City. Surrounding this would be the LakeHill Resort, with retail, offices and residences. The projects would create 50,000 permanent jobs and 100,000 overall jobs, he detailed. “I want to live to see it,” said Ch’ng, who was  70 at the time.

Ch’ng started giving shape to this vision through Malaysia Pacific, a company that he was called to advise in 2004 by billionaire Quek Leng Chan of the Hong Leong Group. By 2005, he was appointed chief executive and the next year his family bought a controlling interest. Ch’ng steered it to profitability, earning media encomiums as “a turnaround guru.”

Far from dulling his ambition, the financial crisis served only to fuel it. In 2008, Malaysia Pacific netted $16 million in profits on revenue of $25 million. The top line would jump to $1 billion when the Iskandar project would go on stream, he boasted. Instead of scaling back, he sped up. Now, he is paying the price, as the Minority Shareholder Watchdog Group, Bursa Malaysia and the Securities Commission

Source

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Is This the Big One? The New Wave of Financial Instability


Information Clearing House

By Mike Whitney

EconomicCollapse

January 28, 2014 “Information Clearing House – Global stocks were hammered on Friday for a second straight day on news of a slowdown in China and turbulence in emerging markets. The Dow Jones Industrials suffered its worse drubbing in more than two years, tumbling 318 points on Friday to end a 490 point two-day rout. Emerging markets currencies were whipsawed by capital flight as foreign investors fled to the safety of U.S. Treasuries. Turkey’s lira and the Argentine peso were particularly hard hit setting record lows in the 48 hour period. The scaling back of the Fed’s $85 billion per month asset purchase program, called QE, has altered the dynamic that made emerging markets the “engines for global growth”. The policy reversal has triggered a selloff in risk assets and sent EM currencies plunging. Here’s a summary from Bloomberg:

“The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by political and financial instability.

Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.” (“Contagion Spreads in Emerging Markets as Crises Grow,” Bloomberg)

Paradoxically, Bloomberg editors blame the victims of the Fed’s failed policy for the current ructions in the markets. In an article titled, “What’s Behind the Emerging-Market Meltdown” the editors say,”emerging-market governments … should recognize that this week’s financial-market turmoil was, to varying degrees, their own fault.” … “the best way for emerging-market governments to restore confidence would be to improve their policies.”

Logically, one would assume that the editors would throw their support behind capital controls or other means of stemming the destructive flow of speculative capital into domestic markets. But that’s not the case. What the editors really want, is policies that trim deficits, slash public spending, and allow foreign investors to continue to wreak havoc on vulnerable economies that follow their free market diktats. The article is a defense of the status quo, of maintaining the same ruinous policies so that profit-taking can continue apace.

The Fed was warned early on that its uber-accommodative monetary policy was spilling over into emerging markets and creating conditions for another financial crisis. Take a look at this excerpt from an article in Bloomberg back in 2010 where Nobel prize winning economist, Joseph Stiglitz, explicitly warns the Fed of the dangers of QE.

Bloomberg:

“The U.S. Federal Reserve’s plan to boost purchases of bonds poses “considerable” risks by increasing capital inflows to emerging markets, Nobel Prize- winning economist Joseph Stiglitz said in Santiago today.

“All this liquidity that they’re creating is not going back to grow the American economy and is going to Asia and other emerging markets where it’s not wanted,” Stiglitz said…..Increased capital inflows could cause emerging market currencies to appreciate and could create asset bubbles, he said.” (“Stiglitz Says Fed Stimulus Poses `Considerable’ Risks for Emerging Markets,” Bloomberg, Dec 2010)

Events have unfolded exactly as Stiglitz predicted they would, which means the Fed is 100% responsible the carnage in the stock and currencies markets.

The policy has pumped nearly “$7 trillion of foreign funds” into EMs since QE was first launched in 2009. According to the Telegraph’s Ambrose Evans-Pritchard, “much of it “hot money” going into bonds, equities and liquid instruments that can be sold quickly….Officials are concerned that this footloose capital could leave fast in a crisis, setting off a cascade effect,” Pritchard adds ominously.

Whether last week’s bloodbath was just a prelude to a bigger crash is impossible to say, but it is worth noting that the Fed has only reduced its purchases by a mere $10 billion per month while still providing $75 billion every 30 days. That suggests that markets will probably face greater turmoil in the months ahead. Check out this clip from USA Today:

“Emerging markets need the hot money but capital is exiting now,” says (Blackrock’s Russ) Koesterich. “What you have is people saying, ‘I don’t want to own emerging markets.’…

The bigger fear is if the current crisis in currency markets morphs into a full-blown economic crisis and leads to financial contagion, says Matthias Kuhlmey, managing director of HighTower’s Global Investment Solutions.

“The currency story is fascinating and can be a slippery slope – be cautious,” says Kuhlmey, adding that the Asian crisis in the summer of 1997 that started with a sharp drop in the value of Thailand’s baht, turned into a broader economic crisis that engulfed Indonesian, South Korea and a handful of other countries. It also rocked financial markets.” (“Why emerging markets worry Wall Street,” USA Today)

So, is this the Big One, the beginning of the next financial crisis?

It’s too early to say, but investors and analysts are worried. Fed tightening (via “taper”) will be felt in markets around the world. The trouble in emerging markets will intensify deflationary pressures in the Eurozone and put a damper on China’s growth. Slower global growth, in turn, will create balance sheets problems for undercapitalized and over-leveraged banks and other financial institutions which will increase the probability of another Lehman Brothers-type default.

According to Reuters, a normalizing of interest rates in the US, (which most analysts expect) “could cut financial inflows to developing countries by as much as 80 percent for several months. In such a case, nearly a quarter of developing countries could experience sudden stops in their access to global capital, throwing some economies into a balance of payments or financial crisis, the Bank said.” (“Rout in emerging markets may only be in Phase One,” Reuters)

Clearly, the potential for another financial meltdown is quite real.

For more than four years, the Fed has buoyed stock prices and increased corporate margins through massive injections of free cash into the financial markets. Now the Central Bank wants to change the policy and ease its foot off the gas pedal. That’s causing investors to rethink their positions and take more money off the table. What started as a selloff in emerging markets could snowball into a broader panic that could wipe out the gains of the last four years.

The Federal Reserve is entirely responsible for this new wave of financial instability.

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

Related read :

Comex-Gold-Inventories-12414

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Swissindo – Mr Sino King of Kings ??


Removing the Shackles

VITALLY Important information about SwissIndo- more to come

KingofKings

 

Please take note of this!  THIS is VITAL information that people need to know and understand.  I am pulling together some more information this evening and will post it in the next few hours.  Please share this information!!!

https://www.facebook.com/notes/linda-bee/letter-of-resignation-from-un-swissindo-by-pieta-morgan/10152586833573986

Letter of Resignation From UN SwissIndo by Pieta Morgan

 

28 January 2014 at 08:02

The following is a copy of a Letter of Resignation from the UN SwissIndo submitted by Pieta Morgan.  This is being shared with the permission of Pieta who desires this information be known worldwide.  Please feel free to share or tag anyone you feel may benefit from this information or can disprove her claims.

26th Of January 2014

Dear Ross,

Thank you for your time the other night, it was nice to catch up with you and smooth things between you and I.

I take my Oath and Bond to uphold the OPPT UCC filings very seriously and firmly believe that all steps must be taken strictly within the confines of the UCC filings. I was so excited to be assisting in ensuring that humanity is freed from rule and government (mind control) as per the filings, and ecstatic that all were to blessed with abundance, and to be part of the solution for humanity and our Mother Earth, a completely new way to BE, a truly consensual system, where no way of living is forced upon another.

At the beginning of my time with Swissindo I was told that Mr Sino had sworn and oath and bond to the people and Mother Earth, and that his plan was to honour the filings, agreeing that they were in fact international law and the CVAC system was the way to move forward. Our conversation the other night did not answer the questions I had, and as you said, you don’t know all the answers either, and they have appointed you emperor. The things I was told were facts in the beginning of my time with the delegation have been changed.

It has never been my intention to cause embarrassment to Mr Sino or any of the delegates, and my only intention is to see humanity free of all rulers and fetters, to be abundant, live in good health,and live in peace.

My concerns about the project are as follows:

1. On my diplomatic papers it mentions the New World Order, I am aware the NWO is a long time plan by those of the ‘dark’ for one global government. Of course this concerns me greatly. I have read an article by Paula stating that Mr Sino’s plans would effectively ‘defang’ the NWO, this article was made public, and either Paula had no idea what Mr Sino’s plan was or her article was a deliberate deception.

2. Mr Sino’s identity is not clear. I was at one point told that Mr Sino was channelled by Mr Soegihartonotonegoro, and that Mr Sino was not in a human form, this information came to me from a person within the delegation that speaks the Indonesian language and that has met Mr Soegihartonotonegoro personally, and yet you told me on the phone that Mr Sino is Mr Soegihartonotonegoro.

3. One of our Australian delegates has brought into Australia Chinese currency printing plates, and when I asked you about it you said that the Chinese currency will be the new world standard currency. When I heard that I realised that this project could potentially be a Global Chinese military take over.

4. You told me that Mr Sino is the king because he is of the Illuminati bloodline.

5. Mr Sino has exempted himself of the filings, declaring himself ‘King of Kings’, on the basis that he has provided remedy, being the gold. He is absolutely disregarding the UCC filings with regard to hierarchy and separation as he has also appointed Queens, Kings, Emperors, Prime Ministers and CEO’s to rule, globally. The filings stand internationally as law. And, with respect, he is not above the filings, unless he can rebut them, which of course can only happen if he has the verifiable signature of the Creator/Source/God, stating he has the right to rule over humanity. He has essentially caused great separation.

6. It concerns me greatly that the Pentagon and the White House are involved in this project, as with the Jesuits, and it concerns me that we, the delegates were asked to cooperate with them. These people have enslaved humanity for centuries, and yet we’re allowing them to have input into the new system we’re creating.. that’s madness, or, it’s a plot against humanity, and my belief is that as it stands, it’s the latter.

7. Lack of transparency and lack of proper language translation. The lack of actual documentation regarding any of the plans for our projects for humanity, means the delegation have no clue what’s going on and exactly what it is they are agreeing to. The one answer we have received is that “We’ll find out in Cirebon”. This is not acceptable.

8. You told me that anyone who causes a scene to disrupt the proceedings in Cirebon would not come home. You asked me not to “streak the cricket match”. I took this as a threat and take it very seriously.

9. I am confused as to what it is I would be required to do when attending the Cirebon ceremony as there is literally no information supplied.

10. If I am required to sign off on a global take over I could not participate, and if I did so I would be committing treason against my brothers and sisters of Earth. I am here completely to serve humanity and represent the people and in doing so I will not sign anything I cannot ethically or lawfully agree to.

11. I am wondering why it is that the delegates have not been paid for the time and effort they’ve put in with regards to the CVAC proposals and meetings, as per the agreement. I have sent a letter asking where our funding was, and yet again, there was no reply, at all.

12. I am concerned that so much money is being spent on the ceremony while people all over the world are starving.

13. I’m concerned that the other delegates, including yourself, believe that they are doing the right thing for humanity just because they’ve been told it’s the right thing, and because they have kind hearts they would do anything to help humanity. But without all the facts how can you know? You can’t. This could be the biggest corporate take over in history, and we literally have no idea what it’s all about. We’re told it’s for the good of humanity, but no real proof. No disclosure.

14. I am concerned that we could be aiding a global Muslim take over, of course that is completely unfounded, it is just a concern to me because of all the speak of Allah from Mr Sino, and the Indonesian delegates, and the fact they openly speak about the one true ‘God’. I do not have a problem at all with kind hearted Muslims, but I do have a problem with any religion being forced on humanity. The New World Order plans were apparently to have a one world religion, this has been well known. I cannot agree to that, it would be unlawful.

15. The latest law ‘system’ that has been suggested by Gary Simon’s AKA Jagamara and approved by Mr Sino, the ‘three tiered system’ is further proof to me that this is a criminal venture designed to further enslave humanity.

16. Gary Simon’s involvement in itself concerns me considering his back ground and shady dealings of which you were aware when he was voted in and did not disclose to the other delegates. That is the reason Sean and I did not vote for him. He allegedly has a history of manipulation and has allegedly attempted to access funds that belonged to the tribal people of Australia without the permission of the Tribal Elders. I am also concerned with the fact you refused to disclose this information to the other delegates, even when I asked you to just before it went to vote. When Sean and I were asked by Phil why it was that we didn’t vote for Gary, we were quickly shut down by Rena.

As you can see there are too many unanswered, important questions, too many concerns, and too many deceptions for us, Sean and I, to proceed as things are. Until Mr Sino agrees with pure intent to honour all of the filings, renounce his alleged ‘kingship’, and until the delegates are able to truly represent humanity according to the filings, with regard to the CVAC systems, we will not be attending the Cirebon ceremony, we will not be signing away humanity’s freedom, and we will not consent to or allow a global Chinese takeover, as long as it is in our power.

In the interest of transparency, we have recorded the conversation you and I had regarding my involvement in the Swissindo delegation, for my own records, and protection, and this may or may not be made public. If it is made public, we will do our utmost to protect the identity of those whom you mentioned in the recording, to the best of our ability.

May the truth set us free.
Kind Regards,
Pieta Morgan

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Holographic Universe


Holographic Universe FULL movie

hologramThe perceptions we observe may well be coming from an artificial source. Suppose we could take our brain out of our body and keep it alive in a glass jar. Put a computer in which all kinds of information can be recorded. Transmit the electrical signals of all the data related to a setting such as image, sound and smell into this computer. Connect this computer to the sensory centers in our brain with electrodes and send the pre-recorded data to our brain. As our brain perceives these signals it will see and live the setting correlated with these.

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Zero Hedge reports on current financial wobbles


logozero

  • tylerMarc Faber Warns “Insiders Are Selling Like Crazy… Short US Stocks, Buy Treasuries & Gold”

Beginning by disavowing Mario Gabelli of any belief that rising stock prices help ‘most’ people (“Fed data suggests half the US population has seen a 40% drop in wealth since 2007“), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron’s interview.

Quoting Hussman as a caveat, “The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There’s no calling the top,” Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but “statistics show that company insiders are selling their shares like crazy.”

His first recommendation – short the Russell 2000, buy 10-year US Treasuries (“there will be no magnificent US recovery”), and miners and adds “own physical gold because the old system will implode. Those who own paper assets are doomed.” Read further

 

  • tylerJPM Sees 28% Withdrawal From Gold Vault In One Day As Another 10 Tons Depart

On Friday, when we remarked on the biggest recorded withdrawal from the JPM gold vault, we said: “Something tells us the next few days will see matching withdrawals from JPM’s gold vault, which at last check was officially owned by the Chinese.” As it turns out we were absolutely correct: according to the just released update from Comex, on Monday the infamous gold vault located below 1 C(hina)MP saw an identical withdrawal of 321,500 ounces, matching the record withdrawal, and amounting to 28% of all JPM gold in storage. Adding to Friday’s drop, this means that a record 47% of JPM’s gold has been withdrawan in a few short days: a trend we are certain will continue until the total holdings of the vault drop to new record lows. Read further

 

  • tylerSome More Fun With Market Timing

Today’s short squeeze, EM-is-fixed, Fed-hope-fueled relief rally (in the face of compounding errors in earnings expectations and outlooks) we thought reminiscing on what happened the last time stocks were this high and over-levered and debt-bloated entities were rapidly revealed for what they were would be useful. While the ‘just three charts’ we showed two weeks ago provide plenty of concern, when the NYSE Composite, which accounts for 1,900 companies representing 61% of the world’s publicly traded stock market capitalization, shows eery similarities to the tipping point in 2007 as NewEdge’s Brad Wishack pointed out earlier, we thought it worth sharing.

With strangely similar magnitudes and durations, the current Fed-driven rally and the previous Fed-driven rally in the NYSE Composite Index are raising concerns aross trading desks…Read further

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