Asia

A health check on India’s shadow banks shows the crisis in the industry is far from over. Indicators from liquidity to share performance show weakness, according to data compiled by Bloomberg as of Sept. 30, Bloomberg News reported. In recent weeks, another financier defaulted, it got harder for investors to cut losses in the sector’s debt and a mortgage lender altered financing plans due to waning appetite for shadow bank bonds.

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Many privately held firms in Shandong, China’s third-biggest province by economic output, are struggling to repay short-term debt due to declining industry fundamentals, entangled cross guarantees and ill-managed investments, S&P Global Ratings said, Reuters reported. China’s slowing economy and enforcement of environmental protection rules have pressured the profitability and cash flow of Shandong companies in over-capacity sectors including oil refining, petrochemicals, steel, aluminium and textiles, S&P said.

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A Turkish group’s acquisition of British Steel depends on lowering the cost of contracts the U.K.’s No. 2 steelmaker holds with its suppliers, according to a person familiar with the matter, Bloomberg News reported. Oyak Group, which manages military pensions, entered exclusive talks in August to buy British Steel, the first step in a rescue that could save about 5,000 jobs in the U.K.’s manufacturing heartland.

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Thailand’s Pace Development Corp., owner of gourmet grocer Dean & DeLuca, said it’s in default on 2.6 billion baht ($88 million) of debt owed to one of the nation’s top banks, Bloomberg News reported. Siam Commercial Bank Pcl has asked the firm to repay outstanding amounts by Nov. 4, Pace Development said in a stock exchange filing on Monday. The company said it will accelerate discussions with the lender to prepare financial restructuring and debt management plans so it can continue developing projects.

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The global collapse in coal prices this year has dealt a particularly heavy blow to miners in Indonesia, the top exporter and one of the largest producers of the fuel. Bonds from the country’s financially weak miners have suffered more than peers elsewhere in Asia due to a lack of diversification and state backing that many competitors enjoy, Bloomberg News reported. Prices of thermal coal -- the kind burned by power plants -- have slumped about 33% this year, and at least four U.S. firms have gone bankrupt.

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More than two years back, the Reserve Bank of India (RBI) named Essar Steel as one of 12 companies whose non-performing assets (NPA) were clogging up the banking system, The Print reported. In its 13 June 2017 order, the central bank had also asked the lenders to initiate proceedings against these companies under the Insolvency and Bankruptcy Code (IBC) at the National Company Law Tribunal (NCLT). Accordingly, the NCLT bench in Ahmedabad started hearing insolvency proceedings against Essar Steel the same month.

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China’s slipping economic momentum is sparking a shift in government priorities—away from curbing mounting debt levels and toward a renewed focus on raw growth, The Wall Street Journal reported. Gross domestic product growth fell to 6% for the third quarter of the year, hitting the bottom of Beijing’s targeted range, amid clearer signals the government wants to ramp up infrastructure spending and official support for businesses, the kinds of policies that fueled borrowing—and economic expansion—after the 2008 financial crisis.

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The new head of the International Monetary Fund urged policy makers this week to undertake measures to bolster the slowing global economy and asked for a show of hands from those who planned to follow her recommendations. Not many hands went up. Finance ministers and central bankers who gathered in Washington for the IMF’s fall meetings in recent days said in interviews and public events that the biggest risks to the global economy are trade-related uncertainties and divisions among nations over how to reduce them, The Wall Street Journal reported.

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China needs to fundamentally reform its delivery of development finance aid in the Pacific region to ensure it does not create a “debt trap” for vulnerable island nations through its Belt and Road Initiative, a report has warned, the Financial Times reported. The report published on Monday by the Lowy Institute warns if the current $6bn lending splurge from Beijing into the region continues in a “business as usual” manner then it poses a significant risk of future debt sustainability problems.

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Snatch-and-grab is the new hallmark of Indian finance. As a banker friend in Mumbai put it to me only half-jokingly, a unit of "grabbed" cash collateral in hand is worth more than two units of hypothetical receivables, a Bloomberg View reported. Yet this is no laughing matter. Not only is opportunistic behavior going to worsen India’s $200 billion-plus bad loan crisis, but now that everyone from the government’s sleuths to the courts are joining the melee, the ensuing chaos will limit the recovery for lenders and threaten depositors.

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