Chinese Debt to Stumble After 16-Year Run… (Bloomberg)
Investors in Chinese corporate debt have just received a wakeup call. After a total of 38 Chinese debt issuers were downgraded in June, brokerages now are preparing for the country’s first defaults since 1997, according to Moody’s. Analyst Xu Hanfei of Guotai Junan Securities, the nation’s third largest brokerage, had this to say about future downgrades, and even defaults, “The government can’t save everyone… In the future, downgrades may spread to high-yield bonds…” If you’re currently invested in corporate debt of the world’s second-largest economy, you may want answer that wake up call, rather than let it go to voicemail.
Global Indexes Go Their Own Way (Bloomberg)
Far East markets tumbled on the news of China’s corporate debt downgrades, the ongoing commodities swoon, and the continued strength of the U.S. dollar. Japan’s Nikkei 225 was down 1.43 percent while Hong Kong’s Hang Seng and the S&P’s ASX 200 lost .11 percent and .43 percent, respectively. Conversely, Europe took it as good news, as of the time of this writing, England’s FTSE was up .95 percent, Germany’s DAX was ahead one percent and the STOXX 50 had gained 1.35 percent. Investors in world indexes will no doubt take the dichotomy for what it’s worth, but should tread lightly… At least until the next round of ratings go public.
Bubble Me Once, Shame On You… Bubble Me Twice (Reuters)
Both the Dow and the S&P 500 closed Thursday at record highs, but is this merely baiting investors to forget about the previous bubbles that dropped so precipitously? That’s the question facing investors today as both indexes notched record levels after Morgan Stanley led a pack of companies with better-than-expected earnings. In response to those robust earnings, Morgan shares rose 4.4 percent to $27.70 — it’s highest level since April of 2011. Shares jumped on a 42 percent increase in quarterly profit for the banking titan. But it’s not alone in reporting earnings that beat estimates, as 76 percent of the financials reporting earnings have bested analyst estimates.