China’s December Lending, Money Supply Signal Easing Conditions

January 08, 2012, 6:33 PM EST By Bloomberg News

Jan. 9 (Bloomberg) -- China’s December lending and money supply growth exceeded economists’ estimates, signaling monetary conditions may be easing as the nation’s central banker said it must be prepared for possible shocks from the U.S. and Europe.

New loans totaled 640.5 billion yuan ($101 billion) for the month, exceeding the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, compared with the 12.9 percent median of 18 estimates.

People’s Bank of China Governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain U.S. economic outlook, echoing comments by Premier Wen Jiabao. China last month cut the reserve requirement for banks for the first time since 2008 as Europe’s debt crisis eroded demand for its exports and consumer prices moderated to the slowest pace in 14 months.

“This is better-than-expected monetary data, suggesting monetary conditions have started to ease,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd., who previously worked at the World Bank. Liu said he expects that the central bank may cut the reserve requirement again before the Lunar New Year on Jan. 23. “Such easing will help ensure a soft landing for the Chinese economy,” he said.

The statement posted to the central bank’s website yesterday didn’t contain a figure for China’s foreign-exchange reserves, which are usually released with lending and money supply data issued at the end of each quarter.

External Shocks

Zhou yesterday said in an interview with the official Xinhua News Agency that the global economy will face “a string” of difficulties in 2012 as a result of the European debt crisis, uncertainties in the U.S. and slowing growth in emerging markets. China must be ready to pick appropriate policy instruments to combat external shocks, Zhou was cited as saying.

Fighting inflation is not as urgent now as it was in early 2011, Xinhua cited Zhou as saying after a two-day meeting of financial regulators in Beijing. The National Financial Work meeting, which was attended by senior officials including Premier Wen, is held every five years to form development plans for the financial sector, Xinhua reported.

Wen last week pledged to fine tune monetary policy to preserve growth as business conditions in the first quarter may be “relatively difficult.” The nation’s export growth slowed in November to the weakest pace since 2009.

China is scheduled to release data for December exports, imports and trade balance on Jan. 10. It’s also due to issue December inflation figures on Jan. 12 and data for annual 2011 and fourth-quarter economic growth on Jan. 17, according to the nation’s statistics bureau.

Money Supply

The central bank’s data yesterday showed that December money supply grew at the fastest pace since July. The 12.7 percent pace reported for November was the weakest since 2001.

Lending in December was the highest monthly figure since April. The median estimate of 18 economists surveyed by Bloomberg was for 575 billion yuan of loans in the month.

For the year, lending totaled 7.47 trillion yuan, according to the statement. The central bank may target lending in 2012 of 9 trillion yuan to 9.5 trillion yuan, said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong.

The central bank still needs to ease liquidity in the money market to achieve more lending this year, Kowalczyk said. He said there is likely to be a cut of 250 basis points this year in the amount banks have to hold as reserves, with the first cut before the Lunar New Year holiday.

Deposits

Easing in monetary conditions as indicated by the December data could also reduce the urgency for further policy easing, said Ken Peng, a Beijing-based economist at BNP Paribas SA.

In addition to lending and money supply, the December data also showed Chinese banks added 1.43 trillion yuan of deposits in the month. These funds largely came from the release of fiscal deposits into the commercial banking system as government agencies conducted concentrated spending at the end of the year, Peng said.

A “tepid” M1 money supply growth of 7.9 percent in December suggests that the increased bank deposits may have a “lifting impact” on January money supply, Peng said.

In a separate statement also issued yesterday, the central bank said it will continue to implement prudent monetary policy this year while maintaining policy continuity and controlling inflation expectations. It will also make adjustments more targeted, flexible and forward looking, the central bank said.

--With assistance from Victoria Ruan in Beijing. Editors: John Liu, Dick Schumacher.

To contact Bloomberg News staff on this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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Singapore Syndicated Lending Surges 91% to Record $38 Billion

December 06, 2011, 5:05 AM EST By Katrina Nicholas

Dec. 6 (Bloomberg) -- Syndicated lending in Singapore has almost doubled to a record this year, driven by demand from property developers and a surge in commodity trading.

Loans surged 91 percent to $38.3 billion this year from the same period of 2010, beating the previous record of $30.7 billion in all of 2008, according to data compiled by Bloomberg. The total doesn’t include a S$5 billion ($3.9 billion) loan sought by Temasek Holdings Pte and Khazanah Nasional Bhd., the state-owned investment companies of Singapore and Malaysia, to fund S$11 billion of hotels, apartments, offices and shops.

“Growth for the Singapore market has been boosted by a huge increase in financings for commodity sector,” said Boey Yin Chong, managing director of syndicated finance at DBS Bank Ltd., Singapore’s biggest arranger of syndicated loans. “From a $500 million base in 2007 we’ll probably hit $9 billion plus by the end of 2011.”

The economy in Singapore, home to the world’s second- busiest container port and Asia’s largest oil-trading, refining and storage center, is forecast to expand 5 percent this year after growing 14.5 percent in 2010. While slowing, that’s still better than the 1.9 percent predicted by the Organization for Economic Cooperation and Development for its 34-member nations in 2011.

Shrinking Rate Margins

Borrowing costs fell to an average 73 basis points over benchmark rates since June 30 from 105.5 in the first half of the year, Bloomberg data on 46 loans show. Average loan margins in Asia, excluding Japan, for U.S. dollar-denominated borrowings increased to 243 from 204 in the same period.

As growth in Asia outstrips Europe and the U.S., the region is becoming a more important source of funding for energy traders and suppliers of commodities such as edible oils, grains and sugar, according to Eugene Szeto, HSBC Holdings Plc’s head of Southeast Asia loans syndicate.

Syndicated loans in Europe, the Middle East and Africa fell to $120.5 billion this quarter versus $260.4 billion in the three months to Sept. 30, Bloomberg data show. Commodities have returned 4.9 percent this year versus a loss of 8.2 percent for global equities.

Singapore-based Wilmar International Ltd., the world’s biggest palm-oil processing company, increased a $1.3 billion loan signed in November 2010 to $1.5 billion in October, according to an Oct. 28 regulatory filing.

Geneva-based Vitol Group, the world’s largest independent oil trader, signed a $1.585 billion facility due in 2012 in June for its Asia unit. Vitol has tapped the Asian bank loan market for funds every year since 2006, Bloomberg data show.

Asian Growth

“If Asia is a company’s growth market it makes sense for them to raise funds and build bank relationships here as well,” said Szeto, who is based in Singapore. “Companies are also keen to tap pockets of liquidity in Asia because aside from being an additional funding source, Asian bank market liquidity is seen as relatively more stable and reliable than in parts of the western world.”

Loans to agriculture and mining companies jumped 320 percent in October from October 2010, according to figures from the Monetary Authority of Singapore released Nov. 30. Loans to manufacturers rose 52 percent while building and construction lending increased 23 percent.

As economies in Europe face possible recession, gross domestic product in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam will expand an average 5.6 percent from 2012 to 2016, the OECD said in a Nov. 29 report.

Singapore, ranked by the World Bank as the easiest place to do business, was among the top 20 destinations for international investment last year, according to the United Nations Conference on Trade and Development.

Bookrunner Rankings

HSBC is the third-largest arranger of loans in the city- state, with an 8.9 percent market share, behind DBS at 10.2 percent and Oversea-Chinese Banking Corp. at 9.9 percent, Bloomberg data show. United Overseas Bank Ltd., Singapore’s third largest by market value, is fourth at 8.6 percent.

London-based HSBC, which makes more money in Asia than anywhere else, ranks higher for banks involved in arranging loans and then selling the debt to other lenders. The top five so-called bookrunners for loans this year are DBS, HSBC and OCBC, Sumitomo Mitsui Financial Group Inc. and Standard Chartered Plc.

Bookrunners are responsible for issuing invitations, disseminating information to interested lenders and reporting to the borrower on progress. A bank with the title of mandated lead arranger isn’t always a bookrunner.

Olam, Temasek

“There’s a perception the market is dominated by Singapore banks but that’s not the case despite Singapore banks being active in arranging deals,” DBS Bank’s Boey said. “Having a robust market also means lenders are able to sell down more in syndication.”

Olam International Ltd., the commodities trader part-owned by Temasek, signed a $1.25 billion facility in August with about 30 banks including lenders from the Middle East and India, Bloomberg data show. The 10 banks committing funds to Temasek and Khazanah included Melbourne-based Australia & New Zealand Banking Group Ltd. and Japanese lenders Bank of Tokyo-Mitsubishi UFJ Ltd. and Sumitomo Mitsui Banking Corp., two people familiar with the matter said last month.

Of the $37.1 billion of syndicated loans this year, $31.4 billion have been to property, energy or resource companies, Bloomberg data show.

“Government incentives for commodity companies to open their regional offices here has helped Singapore to corner much of the market for commodity refinancing,” Boey said. “Last year there was about $5 billion done. This year it’s been double that as these global houses seek to diversify funding as well as increase their investment in the region.”

--With assistance from Shamim Adam and Jake Lloyd-Smith in Singapore. Editors: Ed Johnson, Shelley Smith

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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