1. Records show that company to company loans surged to $1.92 trillion in China last year, an amount double the entire loan book of Wells Fargo & Co, the US largest lender. This entrusted lending, so named because banks serve as middlemen, is now the fastest growing major component of China’s elaborate system of informal, or shadow banking. However, this practice whereby companies steep in to lend where bankers fear to thread, poses broader risks for China’s economy.
2. Rising interest rate expectations are fueling the biggest corporate refinancing boom the United States where companies refinanced a whooping $100 billion of loans in January alone. The figure is the largest monthly total in at least a decade, according to data from S&P global Inc. US borrowers have in recent months saved as much as $1 billion in annual interest costs by renegotiating terms with their lenders, according to the Wall Street Journal.
3. For more than two years, the price of oil delivered in the future has been higher than the sport price – a market condition known as contango. That made it more profitable to store oil rather than sell and was a major reason for the oil supply build up that has weighed on the markets for sometime. But now this crucial price relationship may be changing, signaling that a supply glut which forced prices sharply downwards in 2014, may be easing, Bank of America Merrill Lynch and Goldman Sachs are forecasting that current prices could begin to exceed future prices as early as the second quarter of 2017. That situation is known as backwardation. Oil currently trades within a band of $55-$58 a barrel.
4. China’s foreign reserves, the world’s largest stockpile of foreign currency dropped below $3 trillion in January, the lowest level in almost six years. Although the drop of $12.31 billion in reserves was bigger than many anticipated, China’s foreign exchange regulator, the state administrator of foreign exchange is playing down the significance of the fall. The Chinese economy in recent months has shown signs of improvement as higher commodity prices have boosted industrial profits and some private businesses have regained appetite for investment.
5. Turkey is beefing up its fledgling sovereign wealth fund by transferring the state’s holdings in some of the country’s prime companies, including Turkish Airlines, gas producer Turkiye Petrolleri, Halkbank and Turk Telekom, to the fund. The fund set up with a mere $13 million endowment last August, is now a proud guardian of billions of state asset. Turkish officials say the move will give the fund the financial power to access cheaper credit to support Turkey’s massive infrastructure investment bid.
THIS WEEK’S HUMOUR
What we do for ourselves dies with us but what we do for others and the world remains and it is immortal – Albert Pike
