Singapore Banking Crisis

[soikee]

Forget about Europe, investor tips Singapore banking crisis



While investors fret about the carnage in European bank stocks, some analysts are warning that they're ignoring problems much closer to home: the possibility of a major Asian banking crisis.

Legendary Swiss investor, Felix Zulauf who runs Zulauf Asset Management, was one of the first to sound the alarm, warning that China's economic woes will inevitably infect Singapore and would likely prompt a banking crisis.

"Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China," he told Barron's Roundtable last month.

"Singapore's banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits".

He argued this would likely cause carry trades to backfire, triggering heavy losses for those who have borrowed heavily to buy higher-yielding assets.

"I expect a banking crisis to develop in Singapore and to spread eventually to Hong Kong," he added.

But Zulauf isn't alone in worrying about the financial health of Singapore's major banks. Analysts warn that the Singapore's three largest banks – DBS, Oversea-Chinese Banking Corp and United Overseas Bank – could suffer a sharp spark in problem loans if the Chinese economy brakes sharply.

After all, all three are major lenders in the Asian region, with significant corporate loan books. The three banks could face a big jump in their problem loans if there is a spate of defaults by debt-laden Chinese corporates, or from other companies in the region which are already seeing their earnings tumble as a result of flagging Chinese growth.

Already, investors are showing a skittishness about the banks. Although Singapore's stock exchange has been closed this week due to Chinese New Year, fears about the hefty exposure of Singapore's three biggest banks to mainland China have been weighing on their share prices.

The share price of DBS has slumped close to 30 per cent in the past year, while that Oversea-Chinese Banking Corporation is down 27 per cent. At the same time, the share price of United Overseas Bank (which has a lower exposure to China) has declined by 23 per cent.

Meanwhile, jitters over the exposure of Asian banks to China is causing global investors to withdraw funds from Singapore, which has helped push the Singapore dollar close to a six year low.

It's a similar problem in Hong Kong, where capital outflows appear to be accelerating as investors worry about the huge exposure that the city's major banks have to Chinese borrowers.

Analysts warn that this could create a liquidity problem for Hong Kong's banks because while global investors are able to quickly withdraw their funds from this deregulated financial centre, local banks face a much tougher task in extracting their cash from mainland China.

In addition, capital outflows are putting upward pressure on short-term interest rates, and fuelling nervousness about the outlook for housing prices in Hong Kong, which have already fallen almost 10 per cent from their September peak.

The Hong Kong dollar recently touched a seven and a half year low against the US dollar, amid growing speculation that the city will be forced to end its currency peg with the greenback.

And these worries are already being reflected in sharp slides in the share prices of UK-listed banks such as HSBC and Standard Chartered, both of which are estimated to derive around a third of their revenue from China.

HSBC saw its share price drop by a further 1.4 per cent in trading overnight, while that of Standard Chartered dropped by 5.6 per cent.

In the past year, HSBC has seen its share price tumble by 29 per cent, while Standard Chartered's share price has notched up a stunning 55 per cent decline.



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Tuniasek whore jinx's recent huge investments in Chinese banks must be facing huge losses.

Never mind lah for it's only CPF money.

 

[yahoo55]

Sinkie banks are also quite heavily exposed to the oil and gas sector and commodities sector which the article did not mention. DBS loaned $31 billion, OCBC loaned $18 billion, and UOB loaned over $10 billion in the O&G sector. And the struggling commodities sector excluding oil and gas, OCBC loaned another $15 billion, DBS loaned $12 billion, and UOB loaned $6 billion.

With the prolong crash in oil prices and commodities prices, many big loans by Sinkie banks in these sectors will likely end up as bad loans as the companies go bankrupt. That's one reason why Sinkie bank shares have been sinking badly.

See more at: http://sbr.com.sg/energy-offshore/n...gling-oil-and-gas-sector#sthash.KU06oX5s.dpuf

Tuniasek whore jinx's recent huge investments in Chinese banks must be facing huge losses.

Never mind lah for it's only CPF money.

Temasek also own Standard Chartered shares that have crashed 55%! CPF could be a Ponzi scheme by PAP and years down the road Sinkies could discover that PAP have quietly lost their CPF money from bad investments by Temasek and GIC.

 

[Ebolar8SG]

In this type of crisis bankers are RISK SUCKERS. Played out by all sides. Funds' owners and borrowers' both screw the banks and push risks to banks. Banks sucks risks from both sides. For only tiny profits potential w huge risks.

Transaction volume dropping dirt low. Banks need to pay highest costs to maintain imge of firm stability and existence. Office / staffs / ATMs / web / servers / phone call centers.... to forge reliable image of not possible to collapse - under this stormy crisis very painfully struggling.

 

[dr.wailing]

70% of the electorate are confident that GIC and Teamasick will come to the rescue of the local banks.

 

[virus]

yes... long term investment. soon sinkie banks will be giving negative interest rates for all saving accounts and there will only b 1 bank standing. hong leong bank

 

[mojito]

Just some bad debts here and there. No problem. Sometimes in business you lose, that is part of the game. Wage slaves won't understand one lah.

 

[yahoo55]

A massive banking crisis is brewing in Singapore, says Swiss billionaire Zulauf

Published: 11 Feb 2016

The three biggest banks are losing capital.

A crisis of staggering proportions is looming in China, and tiny Singapore will be caught right in the middle of the storm once the disaster finally erupts.

Speaking at the annual Barron’s roundtable, Swiss billionaire investor Felix Zulauf warned that Singapore’s largest banks are at risk of massive capital outflows if the Chinese economy experiences a hard landing, which he expects will happen this year.

“We are in a down cycle that will end with crisis and calamity. China in today’s cycle is what US housing was during the financial crisis in 2008,” Zulauf warned.

Zulauf warned that capital outflows in China will continue, prompting regulators to devalue the yuan by as much as 15% to 20% within the year. When this happens, Asian economies which are heavily dependent on China—particularly Singapore—will suffer because Chinese corporates will cut their imports even more, while indebted Chinese companies will be placed at greater risk of default.

"I expect the situation the deteriorate to a point where we will witness a banking crisis in Asia that will hit Singapore and Hong Kong particularly hard," Zulauf said.

“It is conceivable that Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Singapore’s banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits,” Zulauf said.

He said that such a situation will cause carry trades to go awry, which will result in steep losses for heavily-leveraged traders.

“I mentioned the potential for a banking crisis in Singapore. I don’t recommend shorting Singapore bank stocks, but rather the EWS, or iShares MSCI Singapore ETF. In this case, an investor will benefit from both declining local stock prices and a decline in the Singapore dollar against the U.S. dollar,” said the report.

See more at: http://sbr.com.sg/financial-service...swiss-billionaire-zulauf#sthash.oBXNI2Qd.dpuf

 

[yahoo55]

http://www.bloomberg.com/news/artic...banking-losses-may-top-400-of-subprime-crisis

Bass Says China Bank Losses May Top 400% of Subprime Crisis

February 11, 2016

Kyle Bass, the hedge fund manager who successfully bet against mortgages during the subprime crisis, said China’s banking system may see losses of more than four times those suffered by U.S. banks during the last crisis.

Should the Chinese banking system lose 10 percent of its assets because of nonperforming loans, the nation’s banks will see about $3.5 trillion in equity vanish, Bass, the founder of Dallas-based Hayman Capital Management, wrote in a letter to investors obtained by Bloomberg. The world’s second-biggest economy may end up having to print more than $10 trillion of yuan to recapitalize banks, pressuring the currency to devalue in excess of 30 percent against the dollar, according to Bass.

Bass, 46, scored big after betting against mortgages in 2007, racking up gains as the world’s largest banks wrote off more than $80 billion in subprime losses. All his calls haven’t been as prescient. He revealed wagering on a collapse in Japan’s government-bond market in 2010, a short position that Bass later acknowledged that other bond investors had nicknamed “the widow maker.”


Largest Resetting

“What we are witnessing is the resetting of the largest macro imbalance the world has ever seen,” he wrote in the letter. “Credit in China has reached its near-term limit, and the Chinese banking system will experience a loss cycle that will have profound implications for the rest of the world.”

Bass said his hedge fund has sold most of its riskier assets since the middle of last year to position itself for 18 months of “various events that are likely to transpire along this long road to a Chinese credit and currency reset.” In an e-mailed response to questions, he said about 85 percent of his portfolio is invested in China-related trades.

“The problems China faces have no precedent,” Bass wrote in the letter. “They are so large that it will take every ounce of commitment by the Chinese government to rectify the imbalances. Risk assets will not be the place to be while all of this is happening.”


Deceleration Pattern

Chinese growth, which averaged 10 percent for three decades through 2010, has decelerated for five straight years and in 2015 slowed to 6.9 percent, the lowest rate in a quarter of a century. It will ease to 6.5 percent this year, according to a Bloomberg survey of economists. The economy continues to transition toward growth driven by services and consumption instead of manufacturing and investment, but the new drivers haven’t yet proven sufficient to offset the lagging older ones.

Bass estimates the Chinese economy actually expanded last year at a slower pace than reported, about 3.6 percent, according to the letter. He estimates that of China’s $3.2 trillion in foreign-exchange reserves, about $2.2 trillion are liquid.

The banking system, which he estimates swelled 10-fold in assets over the last decade to more than $34.5 trillion, is fraught with risky products used by financial companies to skirt regulations, wrote Bass. The nation’s expanding shadow banking system -- which he says has grown almost 600 percent in the last three years, citing UBS Group AG data -- “is where the first credit problems are emerging.”

Wealth-management products, which have been used by Chinese banks for off-balance sheet lending and to lure buyers with perceived guarantees and yields that trump the deposit rate, are being brought back onto the balance sheets as they begin to fail, according to Bass. He also said the use of trust-beneficiary rights -- the legal rights to trust products -- are “ticking time bombs” because they’re used by banks to hide loan losses.

“We believe the epicenter of the problem is the Chinese banking system and its coming losses,” he wrote. “Until China experiences a significant devaluation, it will not be able to cope with the build-up of credit that has helped fuel its rise, but may, in the short-term, be its undoing.”

Since his successful call betting on subprime mortgages, Bass’s performance has been more mixed, with his main fund returning about 1.6 percent annualized as of last August, the New York Post reported at the time.