China gets steelier about debt restructuring

September 22, 2016

Metals trader Sinosteel has agreed a $4 bln workout. The deal is a fudge, but spreads the pain more widely than expected. Meanwhile, a smaller miner has been allowed to fail. Both episodes suggest China is getting a bit tougher about debt problems in moribund sectors.

China’s big banks enjoy calm before the storm

August 26, 2016

Net profits at CCB and BoCom are stable, as are bad-loan ratios: a pleasant surprise given the wider backdrop. This partly reflects a growing gulf in asset quality between large banks and their smaller peers. The giants are probably also putting off recognising bad debts.

Microfinance leaves India’s banks in the dust

August 23, 2016

After the near-collapse of the industry six years ago, small lenders to the poor are back and growing fast. A tight regulatory leash, low bad loan ratios, and high returns make microfinance a more attractive investment proposition than the country’s ailing state banks.

Qatar’s debt bonanza stores up problems for future

May 27, 2016

Too much of a good thing could be bad for the Gulf state. It has just raised a whopping $9 billion in the bond market thanks to investors’ hunger for yield. Loading up on debt will help Qatar cope with lower energy prices, but just dodges its biggest problem: lavish spending.

Greek deal is rational, predictable, messy

May 25, 2016

Both the IMF and Europe have compromised in Greece’s new debt plan. Athens’ fiscal targets are looser, but less so than the IMF wanted. Its debt costs will fall, but the relief is vague. There’s a hoary cliche about kicking the can down the road. This doesn’t even go that far.

Illinois governor all but summons bond vigilantes

May 17, 2016

In an interview with Breakingviews, Republican Bruce Rauner challenged a pervasive belief in markets that governments can always just raise taxes to plug deficits. The issue resonates beyond his state’s $140 bln fiscal mess. Debt investors have neglected to focus political minds.

Chancellor: UK housing crisis isn’t supply problem

May 17, 2016

British home prices are higher than ever relative to incomes. But nosebleed values aren’t a sign of inadequate supply. It’s all about ultra-low interest rates and foreign capital flows. When Chinese capital flows reverse, the London property bubble will burst.

Money trail shows China sticking to bad habits

May 16, 2016

Total credit jumped again in April, suggesting Beijing is making little progress weaning the economy off its addiction to debt. Infrastructure and property investment are still expanding quickly. Despite renewed talk of reform, growth still seems to be the main priority.

India shows China the way to deal with bad debt

May 6, 2016

State-backed banks in both countries have lent too much to politically connected companies that are now in trouble. While India is pushing lenders to come clean, China is still not admitting the extent of the problem. Future growth depends on a proper cleanup.

Time for banks to go cold turkey on sovereign fix

April 18, 2016

Europe is considering tightening rules that make it easy for lenders to own government debt. Banks addicted to sovereign punts would suffer, and governments lose wiggle room. Yet reform could hasten euro area integration, while ECB bond-buying makes it a less scary prospect.