The communique from the IMF’s International Monetary and Financial Committee

• Global economic growth expected to firm from 2020
• But the risks remain tilted to the downside

• trade tensions
• policy uncertainty
• geopolitical
• sharp tightening of financial conditions against a backdrop of limited policy space
• high debt levels
• heightened financial vulnerabilities

• To protect the expansion, we will continue to mitigate risks, enhance resilience, and, if necessary, act promptly to shore up growth for the benefit of all

Reuters’ latest poll shows that institutions are still favouring the Chinese economy to slow further despite policy support

• China 2019 GDP growth seen at 6.2% (January poll at 6.3%)
• China 2020 GDP growth seen at 6.0%
• China 2019 inflation seen at 2.1% (January poll at 2.3%)
• Sees PBOC keeping benchmark lending rates steady in 2019
• Sees PBOC cutting RRR by another 150 bps before the end of the year

Monetary Authority of Singapore leaves monetary policy unchanged

• Maintains the current rate of appreciation of the $NEER policy band
• No change to width and centre level
• Policy stance is consistent with a modest and gradual appreciation path of the SNEER policy band that will ensure medium-term price stability.
• MAS is revising the 2019 forecast range for mas core inflation to 1-2%, from 1.5-2.5% previously. core inflation is likely to come in near the mid-point of the revised forecast range.
• 2019 forecast for CPI-all items inflation was revised down to 0.5-1.5% from 1-2% in February, taking into account the decline in global oil prices in late 2018. this forecast for headline inflation remains unchanged.
• Despite some pickup in labour costs, inflationary pressures are mild and should remain contained.
• GDP expected to come in slightly under midpoint of 1.5 – 3.5% 2019 forecast

• 2.0% q/q (vs. 1.2% expected and 1.4% prior)
• 1.3% y/y (expected 1.5%, prior 1.9)

The timing of the data can varied, but around 0300GMT has been good for recent releases.

First to hit will be ‘yuan terms’, followed by USD terms 9again, based on recent experience.

In February exports plummeted, which made sense given the trade tensions with the US. But is this just a back fitted narrative? The question is how much the Feb data was hit by the lunar new year holidays. Hopefully March is clearer, but Goldman Sachs warn the distortions from the holiday can persist into the first half of March.

Yuan terms

China trade balance for March: expected CNY 178.2bn, prior was CNY 34.6bn

• Exports y/y: expected 14.8%, prior was -16.6%
• Imports y/y: expected -9.6%, prior was -0.3%

USD terms

China trade balance: expected $7.05bn, prior was $4.08bn

• Exports: expected 7.3%, prior -20.8%
• Imports: expected -1.3%, prior was -5.2%

The latest forecasts from the IMF (prior ones were in Jan)

International investors are making big purchases in China’s $1.4 trillion pool of distressed loans as they pile up at faster than state-owned banks can clear them away.

Foreign buying of Chinese distressed loans totaled 22 billion yuan ($3.27 billion) by book value in 2018, said Li Jiaqi, an executive director at Shenzhen Qianhai Financial Assets Exchange, a brokerage for bad debts. That is double the value in 2017, and 2019 is expected to be even larger.

American and European funds have waded in. Oaktree Capital Management CEO Jay Wintrob said his firm invested in distressed Chinese loans during the October-December quarter. Foreign investors were buyers in more than 10 bulk sales last year, with some, including Lone Star Funds, Bain Capital and Goldman Sachs, making multiple purchases.

The foreign money pouring into China’s distressed debt market, chasing after discounts, reflects the depth of the country’s bad-loan problem and hints at the limits of Beijing’s deleveraging effort.

Buying opportunities can be found in the victims of China’s slowing economy, such as a shuttered textile factory two hours west of Shanghai in the Jiangsu Province city of Suzhou. The 100,000 sq. meter grounds are abandoned, and the factory’s interior is littered with material.

The site was sold in early March by a distressed debt disposal company under state-owned Agricultural Bank of China, one of the country’s big national lenders.

The company recruited buyers in a bulk sale of more than 200 loans, selling them for 20% to 30% of their 5.9 billion yuan book value, according to a broker for such deals.

China’s commercial banks carried 2 trillion yuan in nonperforming loans at the end of 2018, up roughly 300 billion yuan from a year earlier, according to the China Banking and Insurance Regulatory Commission. Although disposals quickened to an annual pace of 1 trillion yuan, loans have gone sour at an even quicker rate.

(more…)

The EU says it would act tit-for-tat against the US on aircraft tariffs

• EU says it is preparing its own retaliation over Boeing aid

The South China Morning Post says Chongqing is “the barometer of China’s national market”.

•  China’s largest market in terms of area of residential apartments sold. It is also indicative of the overall China market, with the country’s other coastal cities generally moving ahead of the national cycle