When strange tales of copper to cash merge into investing in property
We hear of a curious tale involving copper and China's property market. Rich Chinese looking to invest in domestic property run up against banks which are under government orders to cut lending for property speculation.
To get around this difficulty, according to the Evening Standard of London, punters instead get a loan to buy copper, sell the metal for cash and invest the proceeds in the property market. The paper tells us that, according to specialists, this has been a massive trade which Western metals traders have serviced for years. It suggests that if the Chinese property market stops rising, then copper prices will tumble.
We are not convinced - and view this as just another way in which mainland Chinese, who have difficulty getting credit, use copper to skirt restrictions on short-term loans. These are then rolled over, using the copper as collateral, to finance property purchases.
The worry surely is: what happens to Chinese banks should the copper price decline significantly, making it difficult to service long-term property loans? One blog suggested that soya was being used in a similar way. But it has long been assumed that loans for 'working capital' by mainland companies have been used in ways the lending banks may not be comfortable with. We live in interesting times.
Offering a different view
The initial public offering of luxury goods company Prada has provided a rich source of material for us to chew over in the past couple of weeks. We are happy to provide a more detached view of the deal courtesy of Dealogic.
At US$2.1 billion, it is the world's fifth biggest listing this year, and the second largest on the Hong Kong Exchange. It lifts the volume of new listings in Hong Kong to US$23.3 billion so far this year - up 267 per cent from the same time last year.
The huge Glencore offering means that for once it is not China that leads the rankings of issuer nationality, but Switzerland with 43 per cent in terms of value. China comes next with 34 per cent, followed by Italy at 9 per cent, Macau at 7 per cent, the United States with 5 per cent, and Japan and Hong Kong at 1 per cent each.
Praise for Patten
Hong Kong's last governor, Chris Patten, may have been surprised by an item in last week's Sunday Times featuring Sherard Cowper-Coles. He retired from Britain's Foreign Office in 2009 after serving as ambassador in a number of countries in the Middle East. He was also head of the Hong Kong department of the Foreign Office in the fractious days before the handover to China.
Cowper-Coles was asked if he had been inspired by any one person or theory in the way he manages. Top of his list was Patten, whom he described as 'an extraordinarily good manager and leader of the government of Hong Kong at a very difficult time. He was inspirational, he was amusing, he was highly intelligent and focused.'
We understand the two had a good personal relationship, but the communication lines between Hong Kong and London sometimes ran hot with 'sharp exchanges and robustly put points of view' over matters of policy and tactics in dealing with China.
What would you give now for an 'inspirational leader' in Hong Kong?
Fonterra enters new market
It is interesting to see Fonterra, the world's biggest dairy exporter, entering the dim sum market even if it's with the longer-term motive of getting Chinese to put down their dumplings and try some New Zealand dairy products.
Bloomberg reports that Fonterra sold 300 million yuan (HK$360.5 million) of bonds in the first offering of dim sum debt by a non-financial company based in Australia or New Zealand. Fonterra will use the proceeds to fund its business in China.
Fonterra has not had a happy record in China. In 2008 milk powder produced by the Sanlu Group, in which Fonterra held a 42 per cent stake, and other dairy firms was found to have been adulterated with the industrial chemical melamine, causing the deaths of six children and making 300,000 others ill. Sanlu was declared bankrupt in December 2008.