Experts Warn Economic Bubble set to Explode
Jun 17, 2013 12:15:24 GMT -5
Post by popcorn on Jun 17, 2013 12:15:24 GMT -5
Experts Warn Economic Bubble set to Explode 
Emerging markets risk an interest rate shock once the U.S. Federal Reserve and other Western authorities start to withdraw global liquidity, the World Bank has warned. “There is the risk that the transition to higher rates occurs in an abrupt and disruptive fashion. In such a scenario, markets react pre-emptively, potentially trapping some participants in vulnerable positions that appeared manageable under low interest rates.” The bank warned that banks “may be at particular risk” in countries that have let rip with the biggest asset bubbles. The institution cut its growth forecast for the global economy to 2.2% this year, a world recession under the bank’s traditional definition, chiefly due to faltering momentum in China and the rest of Asia. The World Bank said real interest rates were likely to jump by up to 270 points in the more heavily indebted BRICS states and other emerging markets as the West unwinds quantitative easing, and the tightening cycle starts in earnest. The Chinese bank Everbright defaulted on an interbank loan last week, one of several instances of lending stress in China over recent days and a sign that bad debts are emerging from the shadows of the banking system.
read more:
business.financialpost.com/2013/06/14/world-bank-warns-of-shock-to-debt-laden-emerging-economies-as-global-liquidity-is-withdrawn/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+FP_TopStories+%28Financial+Post+-+Top+Stories%29
Fitch says China credit bubble unprecedented in modern world history – China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead. ”The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,” said Charlene Chu, the agency’s senior director in Beijing. ”There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph. While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. “It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property,” she said. Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system.
read more:
www.telegraph.co.uk/finance/china-business/10123507/Fitch-says-China-credit-bubble-unprecedented-in-modern-world-history.html
Emerging markets risk an interest rate shock once the U.S. Federal Reserve and other Western authorities start to withdraw global liquidity, the World Bank has warned. “There is the risk that the transition to higher rates occurs in an abrupt and disruptive fashion. In such a scenario, markets react pre-emptively, potentially trapping some participants in vulnerable positions that appeared manageable under low interest rates.” The bank warned that banks “may be at particular risk” in countries that have let rip with the biggest asset bubbles. The institution cut its growth forecast for the global economy to 2.2% this year, a world recession under the bank’s traditional definition, chiefly due to faltering momentum in China and the rest of Asia. The World Bank said real interest rates were likely to jump by up to 270 points in the more heavily indebted BRICS states and other emerging markets as the West unwinds quantitative easing, and the tightening cycle starts in earnest. The Chinese bank Everbright defaulted on an interbank loan last week, one of several instances of lending stress in China over recent days and a sign that bad debts are emerging from the shadows of the banking system.
read more:
business.financialpost.com/2013/06/14/world-bank-warns-of-shock-to-debt-laden-emerging-economies-as-global-liquidity-is-withdrawn/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+FP_TopStories+%28Financial+Post+-+Top+Stories%29
Fitch says China credit bubble unprecedented in modern world history – China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead. ”The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,” said Charlene Chu, the agency’s senior director in Beijing. ”There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph. While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. “It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property,” she said. Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system.
read more:
www.telegraph.co.uk/finance/china-business/10123507/Fitch-says-China-credit-bubble-unprecedented-in-modern-world-history.html
