‘Deflation, Devaluation, and Default’ loom in China this year. The denouement for Shanghai’s bourse will not be pretty, says the US bank.
China is at mounting risk of a financial crisis this year as growth sputters and deflationary pressures trigger a wave of defaults, Bank of America has warned.
The US lender told clients that a confluence of forces are coming together that threaten to chill the speculative mania on the Shanghai stock exchange and to expose the underlying fragility of China’s $26 trillion edifice of debt.
“A credit crunch is highly probable,” said the bank in a report entitled “Deflation, Devaluation, and Default”, written by David Cui and Tracy Tian.
Tag Archives: shadow banking system
Veteran fears ‘beginning of the end’ for Japan as bond market buckles
Yields on 10-year Japanese bonds (JGBs) have doubled in a month and spiked dramatically to 1pc on Thursday, triggering a 7.3pc crash in the Nikkei stock index. It was the biggest one-day fall since the tsunami two years ago, comparable with wild moves seen at the height of the Asian crisis in 1998.
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Richard Koo from Nomura, an expert on Japan’s Lost Decade, said the sell-off in recent days has shown that the BoJ may not be able to hold down yields “no matter how many bonds it buys”. This could lead to a “loss of faith in the Japanese government” and the “beginning of the end” for its economy, if handled badly. Continue reading