Asia

Regulators in some Asian countries are getting tougher on auditors after landmark defaults, in an increasingly high-stakes game as investors call for earlier warning signs amid expectations for debt failures to mount, Bloomberg News reported. High-profile collapses of commodities trader Noble Group Ltd. and India’s shadow lender Infrastructure Leasing & Financial Services Ltd. have rocked investors over the past year. In China, a spate of defaults has raised concerns over the quality of financial reports.

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Bets on beaten-down Chinese distressed bonds could pay off if the nation persists with its credit easing and there’s a sustained rally in the domestic stock market, according to an Asia-based hedge fund that manages $3.5 billion, Bloomberg News reported. Distressed dollar bonds from Chinese issuers have had their best start to a year since 2012. A strategy that includes investing in these notes “could generate out-sized returns” if an improving economy and share gains help investors recover more money from troubled debt, said Kevin Wu, a portfolio manager at Pinpoint Asset Management.

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Turkey’s Cukurova Holding is considering whether to ask Ziraat Bank to restructure a dollar-denominated loan it took out from the state-owned lender five years ago, according to people familiar with the plans. Cukurova has so far only made interest payments on the $1.6 billion loan and will seek a meeting with the bank before a pre-scheduled payment in July, should it decide to ask for the debt to be reorganized, the people said, asking not to be identified because the deliberations are private, Bloomberg News reported. The 10-year loan had a three-year grace period.

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The new chief of Kazakhstan’s central bank dodged a debt claim in 2014 thanks to a legal system that’s failed to protect lenders from rampant defaults and repeated crises, Bloomberg News reported. In 2014, Yerbolat Dossayev and three business partners were given a reprieve on repaying 1.9 billion tenge, then worth $13 million, that they’d personally guaranteed to the central Asian country’s biggest bank at the time. It’s not clear whether the debt was ever repaid.

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China’s biggest default scares of 2019 have taken bondholders on some wild rides, underscoring both the risks and the opportunities for investors as more of the nation’s companies struggle to repay debt, Bloomberg News reported. At least three large Chinese borrowers -- Qinghai Provincial Investment Group Co., China Minsheng Investment Group Corp. and Beijing Orient Landscape & Environment Co. -- missed bond-payment deadlines last month only to come up with the cash shortly thereafter.

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The catastrophic slump of Singapore’s much-vaunted water and power company, Hyflux Ltd., has stunned 34,000 retail investors who were lured by the promise of a 6 percent annual return forever from a company that seemed to have a gold seal of government approval, Bloomberg News reported. At the heart of the debacle is Tuaspring, a desalination and power plant that cost S$1.1 billion ($809 million) and was heralded as one of the “national taps” for an island that had long depended on importing water and harvesting rainwater for survival.

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The developing world could be heading towards a new debt crisis. Public debt in emerging markets now averages 50 per cent of gross domestic product, the highest level since the 1980s. More than 80 per cent of developing countries have increased their public debt in the past five years, the Financial Times reported in a commentary. The number of developing countries whose public debt level is rated as “unsustainable” or “high-risk” is now 32, more than double the number in 2013. Most of the media’s attention has focused on Chinese loans that add to developing country debts.

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India’s debt-laden Jet Airways Ltd denied a media report on Monday that it had secured a 20.50 billion rupee ($293 million) loan from state-owned Punjab National Bank (PNB) to help pay overdue plane leasing fees and salaries, Reuters reported. The airline, which has had to ground planes after failing to make payments to leasing companies and is behind on paying pilots’ wages, said in a statement to the stock exchange that it has an existing credit facility of $300 million from PNB and that the bank has not provided any fresh credit.

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Investors are at it again, sorting through the heap of China’s credit data. Last month’s aggregate social-financing numbers, released Sunday, show the flow of new credit in (and around) the financial system fell 41 percent in February from a year earlier, a Bloomberg View reported. Retail loans posted their largest monthly drop on record. Companies continued to struggle with working-capital financing; bonds were the main channel of funding. Looking for signals of economic recovery in such noisy data is a fool’s errand. Just a month earlier, the same figure surged 51 percent.

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Debt Catches Up With Turkey

It’s payback time for Turkey’s economy after a decade of living beyond its means, and the reckoning couldn’t come at a worse time for President Recep Tayyip Erdogan as the country heads toward bellwether municipal elections. An era of record monetary stimulus around the world supercharged Turkish companies as capital came pouring in, more than doubling corporate credit in the past 10 years, Bloomberg News reported. Driven by Erdogan’s push for growth at all costs, the momentum rarely stalled as the Middle East’s biggest economy repeatedly boomed back to life after downturns.

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