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China Adds Funds to Banking System to Avoid Liquidity Shortage
China injected liquidity to the financial system by offering medium-term loans to banks, in the government’s latest effort to avoid a funding crunch this month. It kept interest rates on the loans unchanged. The People’s Bank of China added 200 billion yuan ($28 billion) through the medium-term lending facility at a rate of 2.95%, according to a statement Monday. The injection was widely expected after the central bank said last week that it planned to roll over the one-year funds on Monday, depending on demand. It had allowed 500 billion yuan of the loans to mature on June 8.
At least 2.7 trillion yuan of cash will evaporate from the nation’s financial system in June as short-term bank debt and policy loans mature. That puts pressure on the central bank to maintain its supportive policy stance without fueling a credit bubble. While Chinese authorities have cut policy rates multiple times this year, they’ve avoided the large-scale stimulus seen in other major economies to avoid aggravating the country’s massive debt problem.
China’s central bank has been conducting MLF operations on the 15th of very month or the first business day after that, a pattern that analysts have said may help standardize open-market operations and improve monetary-policy transparency. Another 240 billion yuan of the one-year facility is due to mature on Friday.
Separately, the PBOC allowed 120 billion yuan of 7-day reverse repurchase agreements to mature on Monday.
https://www.bloomberg.com/news/articles/2020-06-15/china-adds-funds-to-banking-system-to-avoid-liquidity-shortage
China's "V-Shaped" Recovery Stalls As Big Three Macro Signals Disappoint
As a second wave of COVID-19 begins to spread in both Beijing and Guangzhou (with a warning from a Vice Premier of a high risk that the outbreak spreads and new figures show Beijing reported 36 new cases on June 14), China's miraculous "V-shaped" recovery was expected to continue.Early in the evening, China home prices beat expectations rising at a 0.42% MoM clip - the best since Oct 2019…because who wouldn't want to be bidding up prices in China right now. Earlier in the month, the manufacturing PMIs suggested some further stabilization, though not much of a strengthening last month. Exports dropped, though by less than anticipated, at -3.3% year-on-year, while imports tumbled hard, with a 16.7% slide.
And then the big China data dump hit:
-Industrial Production -2.8% YTD YoY (slightly better than the expected 3% drop and an improvement on last last month)
-Retail Sales -13.5% YTD YoY (matched expectations and improved from the 16.2% drop last month)
-Fixed Asset Investment -6.3% YTD YoY (worse than the expected 6.0% drop but an improvement over last month)
-Property Investment -0.3% YTD YoY (better than the 0.8% drop expected and a big improvement from the 3.3% drop last month)
-Surveyed Jobless Rate 5.9% (as expected and better than the 6.0% last month)
The immediate takeaway perhaps is that China’s economy continues to improve (after the crushing Q1 blow due to COVID-19 containment-driven shutdowns) but that pace of recovery may not be living up to expectations. Of course, none of this should be a massive surprise as, once again, China has injected unprecedented amounts of credit into the economy to keep the mirage of growth alive and maintain a semblance of social cohesion. The question is - what happens when the second wave (or third) hit and even more so-called "stimulus" is needed?
https://www.zerohedge.com/economics/chinas-v-shaped-recovery-stalls-big-three-macro-signals-disappoint
SoftBank invests in Credit Suisse funds that finance its technology bets
LONDON (Financial Times) – SoftBank has quietly poured more than $500m into Credit Suisse investment funds that in turn made big bets on the debt of struggling start-ups backed by the Japanese technology conglomerate's Vision Fund.
SoftBank made the investment into the Swiss bank's $7.5bn range of supply-chain finance funds, said three people familiar with the matter. Credit Suisse touts these funds to professional investors, such as corporate treasurers, as a safe place to park their cash in the short-term debts of seemingly diversified companies.
Marketing documents sent to investors show that these funds have ramped up their exposure to several start-ups in the Japanese group's $100bn Vision Fund over the past year. This has coincided with a disastrous stretch in which $18bn was wiped off the equity value of these technology bets. At the centre of the circular flow of funding is Greensill Capital, a Vision Fund-backed company that says it is "making finance fairer". The London-based firm, which employs former British prime minister David Cameron as an adviser, selects all of the assets that go into the Credit Suisse funds under an agreement dating back to 2017.
The arrangement has allowed SoftBank effectively to provide financial assistance to other Vision Fund companies by paying their suppliers upfront but through a fund commingled with other investors and financing other companies. This means external investors also bear the risk of these companies failing to pay their debts, which one person familiar with the arrangement said could prove problematic if they are unaware of SoftBank's substantial interest.
"You thought you were in an arms-length arrangement where all your fellow investors had a pure financial interest," he said. "Imagine you then found that, in fact, some of your co-investors were funding themselves." SoftBank, Credit Suisse and Greensill Capital declined to comment.
Marketing documents for Credit Suisse's main supply-chain finance fund show that, at the end of March, four of its top-10 largest exposures were to Vision Fund companies, accounting for 15 per cent of its $5.2bn assets. This included companies hit hard in the coronavirus crisis, such as Indian hotel business Oyo and struggling car subscription start-up Fair. A separate document shows that Santa Monica-based Fair was also the second-largest exposure in Credit Suisse's "high income" supply-chain finance fund at the end of last year.
In October, the car subscription company's founder and chief executive resigned shortly after announcing plans to cut 40 per cent of its workforce. Audited accounts for both funds show they had no exposure to Fair at the end of that month, suggesting that they only began financing the company after its difficulties came to the fore. Clients have withdrawn more than $1.5bn from these supply-chain finance funds this year, after a string of Greensill Capital's clients defaulted on their debts in high-profile corporate collapses and accounting scandals, such as former FTSE 100 company NMC Health. Credit Suisse has told investors that a group of insurers and Greensill itself are covering losses in the funds.
Australian financier Lex Greensill founded the company in 2011 and cemented his status as a paper billionaire last year when SoftBank's Vision Fund invested $1.5bn into his eponymous firm.
https://asia.nikkei.com/Business/SoftBank2/SoftBank-invests-in-Credit-Suisse-funds-that-finance-its-technology-bets
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