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As Markets Seesaw, China’s Central Bank Tries to Allay Concern on Tight Credit

June 25, 2013 by Leave a Comment

HONG KONG — The Chinese central bank reassured investors worried about a lingering credit squeeze and declared that it had already been selectively supporting bank liquidity, as Chinese stock markets swung wildly again Tuesday after several days of volatility.

The central bank, People’s Bank of China, eager to rein in soaring lending growth and financial risk, initially refrained from intervening as bank-to-bank interest rates soared last week, but then apparently released more money for lenders. Uncertainty over the central bank’s position produced wide trading swings Tuesday, with the main Chinese stock indexes dropping to their lowest levels since early 2009 before recovering most of the day’s losses near the end of trading.

The Shanghai composite index, which tumbled 5.3 percent Monday, slumped more than 5 percent again by early afternoon Tuesday. It recovered almost all of those losses to close down 0.2 percent. The index’s total decline since a peak in early February has been nearly 20 percent.

After China’s stock markets closed, the People’s Bank of China issued a statement apparently meant to soothe investors’ nerves and maintain pressure on banks deemed to be carrying too much risk.

“In recent days, the central bank has provided liquidity support to some financial institutions that meet the demands of macro prudence,” the bank said on its Web site. “Some banks with ample liquidity have also begun to play a stabilizing role in circulating capital into markets.”

On Tuesday the bank pledged that it would apply open market operations — buying or selling securities to manage liquidity and rates — and other methods to offset “short-term abnormal volatility, stabilize market expectations and maintain stability in monetary markets.”

The reassurances were accompanied by a warning to commercial banks to contain risk and to report promptly any “sudden major problems.” Chinese banks that follow government policies in lending practices and risk controls can expect support from the central bank if they have brief capital shortfalls, the bank said. But wayward banks can expect tougher treatment, it suggested.

“For institutions that have problems in their liquidity management, corresponding measures will be taken on a case-by-case basis, while maintaining the overall stability of money markets,” it said.

“The stock markets are continuing to react to the very elevated funding costs,” said Dariusz Kowalczyk, a senior economist and strategist at Crédit Agricole in Hong Kong, referring to the recent surge in interbank lending rates. Those rates determine what banks pay to borrow from each other, often to cover short-term obligations.

Interbank lending rates, which began to decline last Friday, continued to do so Tuesday. The benchmark overnight lending rate, a gauge of liquidity in the financial market, stood at 5.736 percent. That was down from 6.489 percent on Monday and well below the record high of 13.44 percent reached last Thursday.

But with rates still well above where they were in the last 18 months, around 3 percent, anxiety over the effect on the financial system and the economy persisted Tuesday.

The central bank’s stance could help economic conditions in China, many analysts have said, by instilling more lending discipline and reducing the chances of asset price bubbles and loan defaults that have increased with rapid lending growth in the last few months.

In its latest statement Tuesday, the central bank urged commercial banks to “prudently control the excessively rapid expansion of credit and assets that may lead to liquidity risks.”

Still, many analysts contend that the central bank’s tough stance has risks.

“We believe the biggest risk comes from the P.B.O.C. potentially mishandling the situation,” Ting Lu, China economist at Bank of America Merrill Lynch, said Tuesday, referring to the People’s Bank of China. “That being said, we believe the P.B.O.C. and Chinese policy makers will be aware of the potential dangers and take decisive measures to revive the interbank market, to calm investors and to stabilize the economy.”

In the rest of the Asia-Pacific region, the prospect of slower economic growth in China has weighed on markets for months.

Article source: http://www.nytimes.com/2013/06/26/business/global/china-stocks-tumble-for-second-straight-day.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Spanish Magazine Publisher Bets Against the Crisis

March 17, 2013 by Leave a Comment

MADRID — Andrés Rodríguez, the publisher and founder of SpainMedia, has the most at stake in the debut this month of a Spanish-language edition of Forbes, the U.S. business magazine, in crisis-hit Spain.

For Forbes Inc., the New York-based publisher of Forbes Magazine and his partner in the Spanish licensing venture, “their only risk is if the magazine really proves a failure, because that could hurt their image,” Mr. Rodríguez said Thursday during an interview in his office, inside what had been an abandoned printing-equipment plant. “I’m also betting my image, as well as my money and my work.”

SpainMedia is swimming against a tide that has driven many other Spanish media entrepreneurs out of business amid a recession and credit squeeze. Since the start of the financial crisis, dozens of Spanish publications have shut down and more than 8,000 journalists have lost their jobs, according to the Federation of Spanish Journalist Associations.

In this climate, SpainMedia is adding its incarnation of Forbes to a roster that includes Spanish editions of three other well-known periodicals: Esquire and Harper’s Bazaar — both owned by Hearst — and Robb Report, which is owned by CurtCo Media Labs in Malibu, California. SpainMedia also publishes its own travel magazine, Orizon.

Mr. Rodríguez’s outlook on the future of magazines in Spain goes beyond being merely optimistic. “I’m a publisher who believes that paper as a product is more alive than ever,” he said.

He also sees the sector returning to its “golden era” of 50 years ago when advertising mushroomed and magazines set the benchmark for photojournalism.

“Magazines have their own language and we need to return to the origins of that language,” he added. “It’s also about walking into a bar and sending a very clear message by the way you’re holding the magazine under your arm – and that’s an experience that anything digital will never give you.”

Yet no matter how much Mr. Rodríguez values paper, the transition from print to digital magazines “is now happening, even if it is slower than for daily newspapers,” according to the journalist Pedro Cifuentes, director of a master’s degree program in digital journalism at the IE Business School in Madrid. Mr. Cifuentes said early estimates suggested that circulation for digital magazines had risen 15 percent in Spain last year, compared with a 5 percent decline in printed copies, in line with what happened in markets like Britain. Meanwhile, advertising has fallen about 40 percent overall since the start of the global economic crisis in 2008.

Forbes already published 26 other licensed editions of its magazine, including several in East European countries like Poland and Romania. Spain is the first foray by the family-controlled Forbes into Western Europe.

Asked about the timing of its Spanish entry, Miguel Forbes, a family member who is in charge of the publisher’s worldwide development, said by telephone recently that “the time to launch is when a market is in the process of recovery.”

The Spanish edition of Forbes, a monthly released March 6, had a print run of 65,000 copies. Neither Mr. Forbes nor Mr. Rodríguez would disclose financial details about their venture, which involves SpainMedia paying a licensing fee to Forbes based on its magazine sales and advertising revenues.

“Andrés has shown that he’s able to put out very strong titles with a very lean staff,” Mr. Forbes said of Mr. Rodríguez. “A lot of publishers have a big staff, but it’s hard to make money when you have a large headcount.”

SpainMedia, which has annual sales of about €10 million, or $13 million, operates out of the former printing facility, which Mr. Rodríguez bought two years ago “in the midst of the property collapse” and then renovated. The company has only 30 employees, with an average age of 28. Half the staff members are journalists.

Article source: http://www.nytimes.com/2013/03/18/business/media/spanish-magazine-publisher-bets-against-the-crisis.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

A European Bank Official, Mervyn King, Sees Darker Outlook

December 23, 2011 by Leave a Comment

Mr. King, the governor of the Bank of England, urged banks to meet stricter capital requirements by paying out less in bonuses or to shareholders in dividends instead of curbing lending to the real economy. The recent step by the European Central Bank to provide the region’s banks with cheap financing will ease pressures on financial institutions in the medium term but is no long-term fix for a lending market that needs to be revitalized, he said.

“Overall conditions have worsened,” Mr. King said at a news conference in Frankfurt after a meeting of the board. “Dependence on central banks has risen and signs are intensifying that stressed financial conditions are passing through to the real economy.”

“In a climate of extreme risk aversion, investors lack confidence to continue to provide normal level of funding to financial institutions,” Mr. King said.

The E.C.B. on Wednesday pumped nearly $640 billion into the banking system on the Continent in an effort to ease the region’s credit squeeze. The amount was more than some analysts had predicted and helped to lift some concerns among investors that banks could struggle to get adequate financing. Shares in Deutsche Bank of Germany, BNP Paribas of France and other banks in Europe rose on Thursday.

Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, said he agreed with Mr. King’s assessment that banks were generally more cautious in lending but said the markets were “still a world away from the Lehman situation where there’s a complete withdrawal of credit.”

The recent action by the E.C.B. was probably sufficient to convince investors that “banks won’t pull down their shutters in the first half of next year,” Mr. Milligan said.

Mr. King said the members of the systemic risk board, the European body set up to monitor risks to the region’s financial stability, did not discuss the probability of a member’s leaving the euro zone. Discussions “focused on the stability of the banking system and the pressure on funding,” Mr. King said.

Asked whether the board would expect banks to make contingency plans for the possibility that a country leaves the euro zone, Mr. King said that “all financial institutions are expected to prepare for a wide range of contingencies.”

Mr. King called on banks to work hard to increase their level of capital over the next six months but “not by reducing lending to the real economy.”

“Clearly conditions are difficult and we see that with the funding pressures,” Mr. King said, “but we encourage banks to build up capital when they can.”

Article source: http://feeds.nytimes.com/click.phdo?i=b5054a0e9b5f1fc3f63f32c6c1167525

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Businesses Scramble as Credit Tightens in Europe

November 29, 2011 by Leave a Comment

Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the Continent and around the world.

From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets.

The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump.

The deteriorating situation in the euro zone prompted the Organization for Economic Cooperation and Development on Monday to project that the United States economy would grow at a 2 percent rate next year, down from a forecast of 3.1 percent growth in May. It also lowered its economic outlook for Europe and the rest of the world, and a credit contraction could exacerbate the slowdown.

In addition, Moody’s Investors Service, the credit-rating agency, on Monday raised the possibility of mass downgrades of European government debt if a forceful resolution to the escalating crisis was not found.

Investors have begun to treat Europe’s big banks as the weak link in the global financial chain because of their huge holdings of bonds issued by debt-laden governments like Italy and Spain.

American money market funds have been closing the spigot of money they lend to European banks, forcing them to tighten lending standards and, in some cases, even withdraw financing from longtime customers. To make matters worse, European institutions are simultaneously under pressure from their regulators to hold more capital for each dollar they lend, prompting many banks to reduce their portfolio of loans. Analysts say Europe’s banks could shed up to 3 trillion euros of loans over the next few years, equal to about 10 percent of their total assets.

“If your largest banks aren’t able to provide credit, it hinders economic development and contributes to a recession,” said Alex Roever, a fixed-income research analyst at JPMorgan Chase.

Air France, for example, typically relied on French banks like BNP Paribas and Société Générale to help it finance about 15 percent of what it spends to purchase airplanes. Now those banks are retreating from making airline loans to save capital.

As an alternative, Air France officials say that they started developing closer ties with Chinese and Japanese banks, which have not faced the same pressure as their euro zone counterparts, to help pick up the slack.

Executives of Emirates Airlines, based in Dubai, are turning to the Islamic financing system, as well as to lenders in emerging markets, to help pay for its new fleet as some of the European banks shut off lending. Emirates has ordered 243 aircraft, worth more than $84 billion, from Airbus, Boeing and other aerospace companies.

“We were kind of planning for finance from the European banks,” Tim Clark, president of Emirates, told Reuters. “It’s just a bit difficult now.”

A failure to secure financing could quickly add up to lost jobs in the United States, Latin America and elsewhere.

The airplane maker Boeing recently warned that a European pullback could affect its business next year. With some European banks out of the picture, “this leaves a difference that must be made up by other sources if airplane deliveries across the industry, already set to increase in 2012, are to occur as planned,” said John Kvasnosky, a spokesman for the company.

Embraer, a Brazilian aerospace company, tempered its growth expectations despite having a pickup in commercial and business jet sales in the third quarter.

“This whole situation in Europe again has stalled this recovery process,” said Frederico Curado, chief executive of Embraer, in a conference call with investors in early November. “The way we see the world going forward is of a moderate growth.”

It remains to be seen, though, whether even moderate growth can be achieved. Moody’s cautioned that there was an increased chance that more than one country in the euro zone could default. In spite of that warning, investors put their fears aside and sent stocks up Monday by nearly 3 percent in New York.

Investors remain hesitant about government bond offerings, though. A tepid auction in Germany last week was particularly unnerving since its economy has long been seen as Europe’s financial bulwark. In Italy, weak demand for bonds pushed yields back above the critical 7 percent threshold, a level that has prompted other government borrowers to seek bailouts.

Reporting was contributed by Jack Ewing, Keith Bradsher, Stephen Castle and Sara Hamdan.

Article source: http://feeds.nytimes.com/click.phdo?i=22d2d3fd88a0d762007b9670cfbb0299

Filed Under: Business News Tagged With: , ,