Investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by Sebi to curb inflow of illicit funds. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.
According to Sebi data, total value of P-note investments in Indian markets – equity, debt and derivatives -increased to 1,78,437 crore at March-end, from Rs 1,70,191 crore at the end of February. Prior to that, the total investment value through P-notes stood at Rs 1.75 lakh crore in January-end and Rs 1.57 lakh crore in December-end. In March, investments through the route had touched the highest level since November, when the cumulative value of such investments stood at Rs 1,79,648 crore.
“I like a low interest rate policy, I must be honest with you,” Donald Trump told the Wall St Journal yesterday. His comments have further fired up already strong US government bonds, with the effects spilling over into European debt this morning. Like their US counterparts, German 10-year bond prices are now around their strongest point of the year.
Mr Trump’s new comments are not the only weight on global bond yields. Among other things, geopolitical nerves and the failure of his healthcare plans have also imposed a longer-term weight.
Still, 10-year Bund yields have sunk by 0.02 percentage points so far today to 0.175 per cent. (Yields fall when prices rise.) That’s the strongest level for Bunds since late December.
US yields, which exert a strong gravitational pull on other core markets, now stand at 2.32 per cent, the lowest since mid-November.
State-owned Dongbei Special Steel Group Co Ltd said it faces “uncertainties” about paying interest on medium-term notes
Owned by the Liaoning provincial government in the country’s “rustbelt” northeast, Dongbei formally entered into a bankruptcy restructuring process in October aimed at recovering a reported $10 billion in debt
The company has been at the heart of troubles in China’s debt market, defaulting on nine separate bonds last year, and the province is home to other struggling state steel mills such the Anshan Group and the Benxi Iron and Steel Group.
Long before China Huishan Dairy Holdings, China’s largest daily farmer, became known as the latest Chinese corporate fraud whose stock crashed 90% in seconds after a Muddy Waters report brought attention to its questionable shadow banking funding, exposing the company as a hollow sham and leading to the prompt departure of four of its directors who hope (in vain) to escape prison time, the company was best known for being the first ever company to do cow-collateralized stock buybacks.
For readers whose recollection on this particular topic, fascinating as it may be, is vague, this is what we wrote last May:
“China Huishan Dairy is selling about a quarter of its [cow] herd, about 50,000 animals, to Guangdong Yuexin Finance Lease for 1 billion yuan ($152 million) and then renting them back. The reason: to obtain urgently needed cash (let some other sucker CEO worry about paying the coupon on the lease), so it can repurchase glorious amounts of its stock.
And yes, cows were used as collateral. “It’s not very common to use cows as collateral,” said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. “The value of a cow would fluctuate depending on milk prices and other factors, so it’s a risky asset for lenders. It would be hard to do forced selling – there’s no liquid market for a large number of cows.”
Anyone in mainland China with a lot of money to move — companies foreign or domestic, or individuals — now seems likely to run into the capital controls that the authorities have thrown up in hopes of stopping a sell-off in the currency.
Real estate tycoon Pan Shiyi has given up on selling the Hongkou Soho, a striking Shanghai office tower whose tenants include Japanese electronics group Panasonic. Located just north of the Bund, the city’s iconic waterfront, the building was designed by Japanese architect Kengo Kuma. Pan had been looking to invest proceeds from the sale overseas but sees little hope of gaining approval for that.
Similar cases of apparent official obstruction have surrounded other foreign deals. Online game developer Giant Interactive’s agreed-on purchase of an Israeli peer for 30.5 billion yuan ($4.42 billion) remains under review. Technology group LeEco and conglomerate Dalian Wanda Group have yet to complete their respective U.S. acquisitions of television maker Vizio and TV studio Dick Clark Productions.
Meanwhile, total social financing, China’s broad measure of credit and liquidity, continues rising by double digits. With limited outlets to overseas, Chinese money has nowhere to go but domestic assets.
Hedge funds have cut their short position in 10-year Treasury futures by nearly two-thirds from a one-year high set at the start of March, unwinding a popular trade as US sovereign debt has rallied.
Leveraged funds, a proxy for hedge funds, reduced their net short in 10-year Treasury futures by nearly 49,000 contracts in the week to April 4, data from the Commodity Futures Trading Commission showed on Friday. The net short totaled 136,322 contracts, down from 365,650 contracts on March 7.
Traditional asset managers, who have taken the opposite side of the trade, have also reduced their net long to 226,655 contracts, the lowest level since February.
The divide has represented in part a difference of opinion on the likely path of interest rates in the US. It widened markedly after the Federal Reserve signalled last year that it would tighten policy by at least three quarter-point rate rises in 2017.
The central bank’s perceived hawkishness, alongside a sell-off in Treasuries after the US election, sent yields on the 10-year Treasury to a high of 2.62 per cent in December. Yields on the note have since slid, as the so-called Trump trade fades.
Gold prices have retraced most of their losses since the election, but strategists at UBS are now lowering their outlook on the precious metal.
Joni Teves, an analyst at UBS, lowered her gold price forecasts to an average of $1,300 a troy ounce this year, from their previous estimates of $1,350 and also knocked her projections for next year to an average of $1,325 a troy ounce, down sharply from $1,450 previously.
While she maintains her broadly positive narrative surrounding the precious metal, she cites three key reasons for re-calibrating her gold outlook.
Firstly, she argued that a pick-up in gold interest in the first quarter was slower than expected. While gold prices have recovered by about 9 per cent since the start of the year, most investors are interested in gold not as an investment in itself but rather as a portfolio diversifier.
“Conviction levels have remained low and investors continue to hesitate to take more meaningful positions despite an underlying positive bias, especially as gold hovers below key psychological and technical levels,” she said.
The number of listed Japanese companies declaring bankruptcy in the 2016 financial year fell to zero for the first time since the collapse of the bubble. The zero-bankruptcy feat, which has been achieved just six times since 1964 was last achieved in 1990.
Bankruptcies among listed companies have been consistently low since the Abenomics economic revival campaign got going in 2013 – the year the Bank of Japan began its qualitative and quantitative easing programme. In February last year, the central bank introduced its negative interest rate policy, underscoring the historically low debt servicing burden on Japanese companies.
Just two bankruptcies of listed companies were logged in fiscal 2015, according to Teikoku Databank. The all-time peak of 45 was reached in 2008 at the height of the global financial crisis.
According to Tokyo Shoko Research overall bankruptcies also fell in Japan in calendar 2016 – both in terms of the number of companies (a 4.6 per cent drop to 8446) and in terms of total value (a 5.0 per cent drop to Y2trn).
But analysts point out that those figures do not tell the full story as they track only companies that have undergone court-led liquidation.
Tokyo Shoko Research survey in August last year showed that in a year where around 8,500 companies went through court led bankruptcy, a total of about 27,000 either suspended or dissolved their businesses.