As the world awaits the outcome of the stand-off in Crimea, I thought it might be useful to look at the huge country on other side of the globe, China. Here are some things that happened there is the past few days:
Premier Li Keqiang in a long-awaited closing speech after the People’s National Congress played down the risks to China’s growth and outlook of bad loans and over-indebted corporations. But he warned that there could bond defaults as the government moved to regulate the financial sector.
The price of Château Lafite vintage Bordeaux continues to fall as Chinese oligarchs react to warnings to reduce conspicuous consumption of their favorite tipple.
The Hong Kong Monetary Authority concluded that Swiss bank traders from UBSmanipulated the “HIBOR” interest rate of the local dollar-linked Hong Kong currency, revealed by internal chat messages from 2006-9.
Daimler Benz issued the first foreign panda loans for Chinese investors from a non-bank. A panda loan raises money in renminbi for a foreign company. Daimler borrowed RMB 500 mn this morning.
China suspended mobile phone payment systems and virtual credit cards offered by archrivals Alibaba and Tencent to customers who use barcodes (called QR symbols) to buy stuff. The People’s Bank of China, the central bank, says non-bank payments systems are too risky to be left unregulated. This affects two companies in our portfolio.
Illumina Inc, a US medical devices share I own thanks to Patti the biotech maven, sold an advanced HiSeq X10 gene sequencing system to Wuxi Pharma Tech (WX, an NYSE-listed Chinese pharma company incorporated in the Cayman Islands).
DeNova Homes will open a new housing community in Lathrop, California with solar roofing as the standard feature. Each roof will provide 1.5 kiloWatts unless buyers upgrade for higher output. The solar roofing panels are made in China by a non-Chinese firm in our portfolio.
The Economist Weekly Insights examined how Shanghai’s Free Trade Zone, which it says is “ready for take-off”, fits in China’s trade liberalization policy.
Chinese and other regional investors are buying more Australian dollar bonds and more Japanese Yen. And it has implications for India, now viewed by Nomuraas the least politically-risky emerging market about to hold elections. Compared emerging market risks, the Japanese brokerage concluded that the “comparative study produced one clear standout: India.” “It is the only country where Nomura overweights equities and is also bullish on the currency and local currency (rupee) government bonds. We disagree as subscribers can read below.
Of course there is a message for Vladimir Putin in these tidbits of news. The world is integrated and going it alone may have unintended consequences for Mother Russia.
