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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (15807)	4/13/2014 1:30:01 AM
From: John Pitera	1 Recommendation Recommended By Davy Crockett Read Replies (2) \| Respond to of 33421

China troubles....Roiled Markets In China Spell Trouble For Economy By DAVID IGNATIUS Posted 04/11/2014 07:04 PM ET China's financial markets seem to be signaling trouble as a *government corruption crackdown and loose credit begin to bite and jittery investors scramble for safety.* China remains an opaque country, and even the most knowledgeable experts say they aren't sure how to read the tea leaves. But the warning signs are growing that after decades of economic expansion and exploding wealth, China is moving toward the scary side of the perpetual seesaw between greed and fear that drives financial markets. An early warning that China might be facing a liquidity squeeze came from Patrick Chovanec, chief strategist of Silvercrest Asset Management, at a conference I attended in Shanghai in February. In a subsequent report, he explained that "*a steady stream of defaults has raised awareness of China's mounting bad debt problems"* and that "China's existing growth model has reached its sell-by date." Signs of trouble abound: A report last week by the China Index Academy noted that real estate sales during the first quarter of this year in China's four biggest cities were more than 40% below the levels of a year ago. To sell property and raise cash, developers are said to be cutting prices sharply in some smaller cities. According to Anne Stevenson-Yang, a Beijing economist who blogs for the Financial Times, 40% price cuts have been offered by developers in Changzhou and Qinhuangdao, and developers in Ningbo, Wuxi and Suzhou have offered discounts of up to 40%. The slowdown in China's super-hot property market appears to be part of a broader pattern of difficulty. In mid-March, a big developer in *Zhejiang province defaulted on $600 million in loans, according to the Wall Street Journal; a few days later, a commercial bank in Jiangsu province was hit with a run by skittish depositors. Investors' nerves were frayed partly because China had suffered its first modern bond default in early March, when a solar energy company in Shanghai failed to make scheduled payments. The cascade of bad news in China's construction and commodities sectors has been chronicled by a recent Journal series on "China's Rising Risks."* Reporters explained how pell-mell borrowing by private Chinese companies — corporate debt issues nearly doubled from 2011 to 2013 — hit a wall this year. A cement maker in Zhejiang canceled a $161 million offering in March; a plastic maker had to withdraw a smaller offering; an aluminum maker's bonds were put on a watch list because of losses; trading in a power-equipment maker's bonds was suspended.