Tea and bikkies. Guess who’s been around for a chat and a bit of finger-wagging at the banks about their lending? Why, the Australian Prudential Regulation Authority, the lead bank regulator. It finally got around to directing, or rather chatting to our banks about their lending to investor-buyers, judging by the flood of “leaks” and confirmatory statements from the likes of NAB, Westpac, Bankwest (CBA) and ANZ on changes to lending rules for investor-buyers. We are supposed to think that this mass tightening is a meeting of minds. Far from it, APRA has chatted to the banks after inspecting their lending books in the March quarter, and the tightening is the policy response. And as a result, we have seen the Big Four all tighten their criteria for lending to investors. Where’s the call for an inquiry from Twiggy Forrest? — Glenn Dyer
What about the economy? More statements this week from China’s State Council (its day-to-day cabinet). We’ve seen policies announcing the complete revamp of the internet across China (to improve government “monitoring”?), a new manufacturing policy called Made in China, and guidelines for reform priorities for the rest of this year, which will drive change in a year described as “a crucial year for deepening reform”. “More focus will be placed on promoting financial reforms to push forward the development of the real economy,” the statement said. Specific areas targeted for reform included state enterprises, taxation, the Shenzhen-Hong Kong stock connect, deposit rates, the initial public-offering system, and boosting the global status of the yuan, among others. That helped the Shanghai market stage a 3.7% jump on Tuesday, its strongest in four months. But there have been a couple of quite worrying and unexplained falls in the share prices of three high-flying Chinese stocks listed on the Hong Kong market on Wednesday and Thursday. Is the boom peaking? State Council’s statements made no mention of making sure the economy doesn’t run off the rails. Last week’s directive to banks to keep supporting trillions of dollars of local government projects (many of which are broke and have no hope of ever being profitable) is more in keeping with the real reform agenda for the government this year and next — the stuttering economy.
A Reuters commentator wrote this week:
“China’s policymakers talk much of reform. What really drives them is something different: a fear of chaos. The treatment of the country’s local government debt pile is an example of risk aversion getting the upper hand.”
China’s government has no choice now, because the damage to the financial system and the economy from imploding projects across the country would be very damaging. It would be China’s own Lehman Brothers moment. — Glenn Dyer
Janet’s call. All eyes on US Federal Reserve chair Janet Yellen, who speaks tonight in the US. Those dear, deprived folk in financial markets want a bit of guidance from the Fed chair — perhaps a date, time and hour (to the final minute?) when the Fed will finally increase interest rates. Collectively these folk in the markets are paid hundreds of millions of dollars a year in salaries and bonuses, and yet they want to be spoon-fed by the Fed (just as the poor, deprived dears in the Australian markets want Glenn Stevens to ring them personally, each and every one, and tell them when the bank will next move interest rates. Really!) These people are paid the big bucks for their opinions and to set up their employers’ financial positions and “protect” them against a bad guess, sorry, judgement. The S&P 500 hit its 10th high in 2015 so far overnight (and market pundits pointed out that the index had had 10 closing highs by mid May 2014. How’s that for an irrelevant factoid? — Glenn Dyer