Biggest Indian carmaker’s sales fall most in seven years
REST OF ASIA
Maruti Suzuki India Ltd reported the biggest decline in sales in almost seven years as a slowdown in consumer spending, the largest driver of growth in the USD2.7t economy, became more pervasive.
Total sales dropped about 34% from a year earlier to 109,264 units in July, according to a statement on Thursday. Deliveries of its hatchback models fell 23%, even as sales of the premium Ciaz sedan jumped to 2,397 units from 48 a year earlier.
The worst drop in sales since August 2012 at the unit of Suzuki Motor Corporation indicates that the slowdown in Asia’s third-largest economy may be worsening, as the ongoing credit crisis prompts creditors to go slow on granting new loans. Maruti’s shares are down more than 40% from a record reached last July.
Rivals also reported a drop in demand. Mahindra & Mahindra Ltd said vehicle sales fell 15%, while deliveries of tractors dropped 12%. Commercial vehicles sales also sank. Ashok Leyland Ltd, India’s second-largest maker of trucks and buses, reported 28% drop in dispatches, and Eicher Motors Ltd, the local partner for Volvo Group, posted a 32% reduction.
The government’s annual budget last month lacked specific measures to help companies, leaving the Reserve Bank of India to do the heavy lifting to boost economic growth from a five-year low. The central bank has cut interest rates three times this year. – Bloomberg News.
South Korea’s Kospi Index fell 1.20% to 1,993.06 early-Friday (2 August) morning. It lost 0.36% to 2,017.34 on Thursday.
Shares in Sydney tumbled on Friday with the S&P/ASX 200 Index losing 0.33% to 6,766.30 at the open. The index declined 0.35% to 6,788.93 in the previous session.
The Taiwan Stock Exchange Weighted Index weakened 0.85% to 10,731.75 on Thursday.
CHINA & HONG KONG
Just two years ago, a little-known Chinese lender could raise capital from global investors at a yield of 5.5%, only one percentage point more than the debt of the nation’s leading retail bank, Postal Savings Bank of China Co Ltd.
But that all changed in June, when investors grew concerned about the outlook of the firm, Bank of Jinzhou Co Ltd. Yields on its so-called Additional Tier 1 (AT1) notes blew out to over 21% after its auditors resigned citing inconsistencies in its loans, before coming back down to 11.4% this week (ending 2 August), according to Bloomberg-compiled prices. Loss-absorbing securities from similar issuers, used to fulfil capital requirements, have also come under pressure.
The roller coaster ride for bond buyers is a stark reminder of the risks of investing in China’s credit markets. Growing market concern about smaller lenders has pushed up bond spreads to levels where it may not make economic sense for banks to buy back callable capital notes at the first opportunity they can, contrary to the expectations of investors when they first got into the debt. That is putting further downward pressure on the bank bonds, at a time when investors are no longer counting on an implicit government guarantee for every Chinese financial institution.
Amid the turmoil, smaller Chinese lenders are finding it harder to raise funds. That is a potential negative factor for China’s slowing economy because those lenders are a key source of credit to small and medium-sized companies.
Chinese authorities have been pushing to reduce leverage in the banking system, posing challenges for smaller lenders burdened with heavy bad debt loads. While regulators have been trying to ease market jitters about the sector, further consolidation may be in the works. – Bloomberg News.
The Shanghai Composite Index dipped 0.01% to 2,908.77 on Thursday and the Hang Seng Index slid 0.76% to 27,565.70.
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