Oil extends slide from 11-year low amid signs of China weakness

Oil extended declines from the lowest close in 11 years amid further signs of weakness in China, the world's second-biggest crude consumer. 

PHOTO: BLOOMBERG

JAN 11, 201610:05 AM

[HONG KONG] Oil extended declines from the lowest close in 11 years amid further signs of weakness in China, the world's second-biggest crude consumer.

Futures fell as much as 2.2 per cent in New York after dropping more than 10 percent last week.

Producer prices in China fell for a record 46th month and inflation remained at about half the government's 2015 target. Saudi Arabian Oil Co., the world's biggest crude exporter, confirmed on Friday it was studying options for a share sale, including listing "a bundle" of refining subsidiaries, according to a statement from the state-owned oil monopoly.

Oil slumped last week as volatility in Chinese markets fueled a rout in global equities and US crude stockpiles remained about 100 million barrels above the five-year average.

Money managers began 2016 by reducing wagers on rising prices to the lowest level in more than five years.

"Sentiment indicators are all to the extreme sell," Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. "Until we see a supply-side response, the potential for significantly higher prices is low."

West Texas Intermediate for February delivery fell as much as 73 cents to US$32.43 a barrel on the New York Mercantile Exchange and was at US$32.57 at 8.47am Hong Kong time. The contract slid 11 cents to US$33.16 on Friday, dropping for a fifth day to close at the lowest since February 2004. Total volume traded was about 30 per cent above the 100-day average. Prices lost 30 per cent last year.

CHINA VOLATILITY

Brent for February settlement decreased as much as 65 cents, or 1.9 per cent, to US$32.90 a barrel on the London-based ICE Futures Europe exchange. The contract fell 20 cents to close at US$33.55 on Friday, the lowest since June 2004. The European benchmark crude was at a premium of 37 cents to WTI.

Oil tumbled last week as investors focused on volatility in Chinese markets after the country sought to quell losses in equities and stabilise its currency.

Saudi Arabian Oil, known as Aramco, is studying whether to list "an appropriate percentage" of shares of the parent or a bundle of "downstream" units, according to an e-mailed statement Friday. The findings of the review will be presented to the board of directors, which will make recommendations to the company's Supreme Council, Aramco said.

Speculators' net-long position in WTI crude fell 24 per cent in the week ended Jan 5, data from the US Commodity Futures Trading Commission show. Longs dropped to a five-month low as shorts rose.

BLOOMBERG

    
 

Chinese property developers rush to print private Panda bonds

Overseas-incorporated Chinese property developers are joining the rush to issue Panda bonds in an effort to lock in more attractive funding costs in China's onshore market. 

PHOTO: REUTERS

JAN 11, 201611:59 AM

[HONG KONG] Overseas-incorporated Chinese property developers are joining the rush to issue Panda bonds in an effort to lock in more attractive funding costs in China's onshore market.

Hong Kong-listed Country Garden Holdings, incorporated in the Cayman Islands, led the way at the end of last year with an offering of Rmb1bn five-year onshore bonds via an offshore entity.

Notably, the paper was issued on the China Securities Regulatory Commission-supervised stock exchange market, rather than the interbank bond market, where five previous Panda bonds, including a sovereign offering from South Korea, were printed after getting the nod from the People's Bank of China.

Country Garden also chose a private placement for its debut Panda offering. The format allowed swifter execution as it does not require regulatory clearance and is not subject to a debt cap. "The Shanghai Stock Exchange has been encouraging innovations in the capital market, and the feedback we got from them is that private placement of Pandas is doable, but public offerings are not viable for now as a public offering has to go through the CSRC," said a Shanghai-based bond underwriter.

 

The CSRC removed many of the barriers to corporate bond financing last year. As a result, private placements of corporate bonds only require pre-registration with stock exchanges.

Unlike public offerings, private placements have no issuer profitability requirement and are exempt from a debt-ratio restraint, which limits outstanding debt to 40 per cent of an issuer's net assets.

Flurry of issues The relaxation of fundraising restrictions and sustained monetary easing triggered a flurry of onshore bond issues from the property sector last year. Country Garden raised Rmb14bn from bond offerings through one of its onshore subsidiaries, Zengcheng Country Garden Property Development, in 2015.

The recent liberalisation of Panda bonds reinforced the appeal of onshore financing for Chinese developers. "We expect to see more Chinese developers, which operate onshore, but are incorporated offshore, issue Panda bonds in the stock-exchange markets to take advantage of cheaper funding costs," said a Beijing-based underwriter, who handled Country Garden's trade.

With the support of ample liquidity, onshore renminbi bonds trade at much lower yields than are available offshore. Benchmark 10-year Chinese government bonds were traded around 2.85 per cent on Friday. In the offshore renminbi market, similar government securities were quoted at 3.647-3.572 per cent.

Country Garden sold its first five-year Panda bonds for 4.99 per cent. Its offshore 2021 US$750 million notes were quoted at 6.1/6.5 per cent on Friday on Tradeweb.

Apart from Country Garden's registered 20 billion renminbi Panda bond plan with the SSE, at least three more offshore incorporated Chinese developers are working on such issues.

Shimao Property Holdings plans to raise up to 20 billion renminbi from a private placement of Panda bonds on the Shanghai Stock Exchange. The first batch will fetch no less than 2 billion renminbi and will be issued in mid-January with a tenor of five years, according to a syndicate banker with China Securities, the sole lead underwriter on the placement.

Powerlong Real Estate Holdings, also incorporated in the Caymans, has got approval to raise 6 billion renminbi through a private placement of corporate bonds via the SSE.

Hopson Development Holdings, incorporated in Bermuda, has applied for a private placement of Rmb15bn corporate bonds through the SSE.

IFR

    
 

Chinese group Wanda says revenue surged in 2015

Chinese conglomerate Wanda Group, owned by the country's richest man, said revenue surged nearly 20 per cent in 2015, despite worsening economic conditions in its home market. 

PHOTO: BLOOMBERG

JAN 11, 201611:47 AM

[SHANGHAI] Chinese conglomerate Wanda Group, owned by the country's richest man, said revenue surged nearly 20 per cent in 2015, despite worsening economic conditions in its home market.

Wanda, founded by Wang Jianlin, has its origins in commercial property but is diversifying into areas ranging from entertainment to e-commerce.

Reports say the company might soon take a stake in US film studio Legendary and Wanda is scheduled to hold a news conference in Beijing on Tuesday regarding an overseas acquisition.

The company said revenue was 290.16 billion yuan (S$63.9 billion) last year, up 19.1 per cent from 2014, according to a statement released late Sunday. It gave no specific figure for net profit though it forecast a rise.

The parent group is not listed but some of its subsidiaries are quoted.

Wang is known outside China for a string of overseas acquisitions including the organiser of Ironman extreme endurance contests and Swiss sports marketing group Infront, while it also has a stake in Spanish football club Atletico Madrid.

He burst into the international spotlight in 2012 by buying US cinema chain AMC Entertainment for US$2.6 billion and his company owns more than 200 malls, shopping complexes and luxury hotels across China.

The firm's cinema unit recorded a 49.9 per cent year-on-year surge in revenue last year to 8.0 billion yuan, the statement said. Wanda Cinema Line, which holds an estimated 14.5 per cent share of the Chinese box office, now has 292 cinemas.

The personal fortune of Wang, who is also chairman of Wanda, stood at US$32.4 billion as of Friday, according to Bloomberg Billionaires.

China logged its worst economic performance since the global financial crisis during the July-September quarter, with gross domestic product rising just 6.9 per cent - its lowest level in six years - and hitting several companies' bottom lines.

AFP

    
 

Judiciary looking to enhance court-to-court arrangements in cross-border insolvency: CJ Menon

By

Claire Huanghuangjy@sph.com.sg@ClaireHuangBT

A new network that eventually connects courts of key commercial centres to improve cross-border insolvency is one area Singapore's judiciary is looking at enhancing this year, said Chief Justice Sundaresh Menon as he shared a series of plans at the opening of the legal year on Monday morning. 

PHOTO: SPH

JAN 11, 201611:28 AM

A NEW network that eventually connects courts of key commercial centres to improve cross-border insolvency is one area Singapore's judiciary is looking at enhancing this year, said Chief Justice Sundaresh Menon as he shared a series of plans at the opening of the legal year on Monday morning.

He said the promotion of court-to-court arrangements in cross-border insolvency has become more relevant as corporations now operate in multiple jurisdictions.

So, guidelines must be developed to shape the nature and extent of communications between courts from different jurisdictions and these efforts are led by judicial commissioners Aedit Abdullah and Kannan Ramesh.

In terms of improving criminal justice here, the Law Minister, Attorney-General and CJ Menon have discussed the possibility of setting up a Criminal Procedures Rules Committee that will make rules to govern the conduct of criminal proceedings, including subpoena of witnesses or discovery of documents.

On civil justice, CJ Menon said the District Court's civil monetary jurisdictional limit of S$250,000 is likely to be reviewed this year, as the last revision was in 1997.

At the same time, his team is also looking at increasing the current limit of S$10,000 of the Small Claims Tribunal.

Another key development in civil justice relates to medical litigation.

Medical care is of direct concern to Singaporeans and the justice system must avoid a situation "where the practice of medicine comes to be adversely affected by the medical practitioner's consciousness of the risks of malpractice liability", said Mr Menon, who added that this can lead to the practice of "defensive medicine" and higher insurance costs.

So the judiciary is now evaluating adoption of three measures: promoting alternative dispute resolution especially mediation as a primary step, particularly for cases relating to medical malpractice; moving towards a judge-led process that is less adversarial; and allowing medical assessors to assist judges.

To this end, Mr Menon said a standing panel of medical assessors comprising senior doctors nominated by the Singapore Medical Council will be set up, while a list of medical litigation judges will be introduced in both the High Court and State Courts.

To prepare for the future, the judiciary began working with the Infocomm Development Authority last year to explore technology-driven initiatives.

A "Courts of the Future Taskforce" led by Justice Lee Seiu Kin is to anticipate future needs of court users and develop strategies to meet them.

The Taskforce has received several ideas including use of artificial intelligence and natural language technology to enhance accessibility of information, as well as automation of certain applications, the CJ added.

In wrapping up his speech, Mr Menon also announced the appointment of Professor Ng-Loy Wee Loon as Senior Counsel.

    
 

Asia: Markets resume sell-off on lingering China fears

JAN 11, 201610:57 AM

[HONG KONG] Asian shares tumbled again on Monday as another round of tepid data added to concerns about China's economy, which is already responsible for sparking a rout across global markets at the start of the year.

After enjoying some minor relief on Friday, the region's trading floors were once again swathed in red as panicking investors dumped equities while oil prices also headed south, sitting around 12-year lows.

The gains at the end of last week were not enough to help US and European markets, which ended deep in negative territory as a strong US jobs report was overshadowed by fears about China and its leaders' ability to manage a slowdown.

"The market is concerned about China's financial stability," Matthew Sherwood, head of investment strategy at asset managers Perpetual in Sydney, told Bloomberg News.

"People are also quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play."

On Saturday official figures showed Chinese consumer prices picked up slightly in December but inflation remained about half the government's target. Prices paid at the factory gate, a guide to future inflation, also sank for a 46th consecutive month.

The figures are the latest highlighting the weakness in China, which is expected to have grown in 2015 at its slowest rate in a quarter of a century.

In early trade Monday Shanghai slumped two percent at one point before paring the losses to sit 1.2 per cent lower, while Hong Kong gave up 2.3 per cent, Sydney shed 1.9 per cent, Seoul slipped 0.9 per cent and Singapore was 2.0 per cent off. Tokyo was closed for a public holiday.

Investors extended losses from last week, which was one of the worst starts to a year on record with dealers rattled after trade was suspended twice in four days in Chinese markets. Shanghai ended the week about 10 per cent lower, in echoes of a sell-off that fuelled global turmoil in the summer.

London lost 5.3 per cent over the week, Paris shed 6.5 per cent and Frankfurt dropped 8.3 per cent.

And on Wall Street, the Dow and S&P 500 lost about 6.0 per cent, marking the worst opening week of a year in the history of either index.

Beijing's bungling of the handling of the crisis added to the nervousness.

"Chinese equities have had a tough start to the year. This has flowed around the globe, kneecapping equities, where valuations were already deemed to be stretched," Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand, said.

"A weaker inflation outlook and heightened market volatility has also swung the pendulum back to more policy support." Oil prices continued their slump, with both main global contract dropping around two percent on Monday, with the crisis in China - the world's biggest energy user - adding to a worldwide glut, weak demand and a strong dollar.

Worries about the global outlook also pushed up the price of gold, which is considered a safe investment in times of uncertainty. The precious metal, which is up more than three percent so far this year, bought US$1,105 an ounce Monday.

AFP

    
 

Shanghai, Hong Kong: Stocks resume falls after open

PHOTO: REUTERS

JAN 11, 201610:23 AM

[HONG KONG] Shares in Shanghai and Hong Kong resumed their downward spiral soon after opening Monday after concerns over China's economy hammered global markets last week, and overshadowed a strong US jobs report.

The benchmark Shanghai Composite Index dropped 1.71 per cent to 3,131.85 - having dived almost 10 per cent last week - while the Shenzhen Composite Index, which tracks stocks on China's second exchange, lost 2.25 per cent, or 44.48 points, to 1,934.24.

And Hong Kong's benchmark Hang Seng Index slipped 2.23 per cent, or 456.29 points, to 19,997.42.

AFP

    
 

Yen advances to strongest since August as China drives haven bid

JAN 11, 201610:21 AM

[SYDNEY] The yen rose to the strongest since August as a rout in assets linked to Chinese growth prompted speculators to turn bullish on the currency for the first time since 2012.

Japan's currency has surged 3 per cent this year against the dollar, the biggest gain among 31 major peers, as an eight-day run of reductions to the yuan's reference rate through Thursday sent shock waves through financial markets. The dollar on Friday completed its biggest weekly drop versus the yen since August 2013 even as data showed employers added more jobs than economists had forecast in December. South Africa's rand tumbled to a record low Monday.

"Risk appetite is pretty weak at the moment with what's going on in China and falling equity markets," said Jason Wong, a currency strategist at Bank of New Zealand Ltd in Wellington. "This is going to be a really choppy year and that sort of environment is going to be supportive for the yen." The yen rose 0.1 percent to 117.15 per dollar as of 9:54am in Singapore after touching 116.70, the strongest level since Aug 24. Japanese markets are closed for a public holiday Monday.

Positions that profit from yen gains against the dollar outnumbered bearish bets by a net 4,103 contracts in the week to Jan 5, according to data from the US Commodity Futures Trading Commission. That's the first time since October 2012 the data haven't shown net short positions.

Japan's Prime Minister Shinzo Abe was elected in December 2012, having called for unprecedented monetary easing to end decades of deflation in the world's third-largest economy.

Currency options showed sentiment favoring the yen over the dollar by the most since August 2011, based on one-month risk reversals compiled by Bloomberg.

China left the yuan reference rate little changed for a second day. The People's Bank of China set the rate, which restricts onshore moves to a maximum 2 per cent on either side, at 6.5626 a dollar, little changed from 6.5636 on Friday and 6.5646 the previous day.

While the yen is likely to remain supported in the near term as investors stay cautious about China's foreign-exchange policy, there is increasing risk that the Bank of Japan will ease monetary policy at the meeting that ends Jan. 29 as Governor Haruhiko Kuroda has been warning about weak wage rises, said Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group Plc in Singapore.

That would check the yen's current strength," Mr Mohi-uddin said. "But until the market starts to focus on that risk towards the end of the month, the dollar will stay heavy against the yen in a 115-to-120 range." South Africa's rand plunged as Japanese retail margin traders appear to be getting out of leveraged positions Monday, according to Mohi-uddin.

The currency declined 2.4 per cent to 16.7091 after dropping to a record low of 17.9169.

BLOOMBERG

    
 

China guides yuan higher, stocks fall anyway

China guided its yuan currency sharply stronger for a second straight session on Monday in a move that might calm concerns about a competitive devaluation, but only added to market confusion as to Beijing's ultimate policy intent. 

PHOTO: REUTERS

JAN 11, 201610:09 AM

[SHANGHAI] China guided its yuan currency sharply stronger for a second straight session on Monday in a move that might calm concerns about a competitive devaluation, but only added to market confusion as to Beijing's ultimate policy intent.

Equity investors seemed less than reassured, with the Shanghai Composite Index and the CSI300 index both falling around 2 per cent in erratic early trade, after a 10 per cent plunge last week which triggered a global sell-off of riskier assets.

The People's Bank of China set the mid-point for the yuan at 6.5626 per dollar, confounding analysts who had looked for something around 6.5860.

The move was an apparent reversal of the recent weakening trend which included the biggest one-day drop in five months.

 

China's foreign exchange regulator on Saturday said it would ramp up risk control efforts and push ahead with regulatory reforms, but was frustratingly short on specifics.

The perceived missteps by the authorities have stoked concerns Beijing might lose its grip on economic policy, too, even as China looks set to post its slowest growth in 25 years. Both the Dow and S&P 500 SPX had their worst five-day starts in history last week. "Different signals about FX policy have wrong footed market participants and we are wary in believing that an immediate calmness will soon emerge," wrote Paul Mackel, head of emerging markets FX research at HSBC in a note. "In this context, we expect yuan volatility to remain high while depreciation pressures are likely to remain strong." Chinese markets have had a tortuous start to the year, buffeted by the falling yuan, two days of stock exchange suspensions, weak factory and service sector activity surveys and worries about looming share sales by major stakeholders once a ban on such sales expires.

All of which heightened tensions ahead of China trade data on Wednesday where further declines are expected in exports and imports, underlining the parlous state of world trade flows.

Figures out over the weekend showed Chinese consumer inflation stuck at a subdued 1.6 per cent in December, while producer prices were down a steep 5.9 per cent on the year - a deflationary pulse that is being felt across the globe.

REUTER
S