Asian markets are skittish over China’s bank crackdown and Europe’s bank scares

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The Asian markets started the day queasily with bad news from all sides, mostly from banks, with the ShangHai composite down 2.14%, the Nikkei 225 down 1.28%, and the Hang Sen Index down .96%.  What’s going on?

  • China’s bank regulators tightened the the rules on so-called “wealth management programs,” often described as China’s own sub-prime loan bubble. WMPs allow banks to pool money off the books to invest in often dubious real estate projects while promising high returns to eager Chinese savers. After the collapse of one such project marketed by Huaxia bank, the government announced new rules for transparency and capital regulations. This has investors fleeing bank stocks in mainland China, a contagion that has spread into Hong Kong markets. According to Fitch the value of the outstanding WMP’s has reached ¥10 trillion—a scary 16% of commercial bank deposits. Yipes.
  • Europe doesn’t look so good after the Cyprus bailout gave the jitters to banks across Europe and Italy failed to form a government, which analysts said contributed to sales in many indices. Individual Asian companies with big international exposure took divesSony saw losses of 4% in the Nikkei.
  • Australia’s Nufarm, a major agricultural supplier, booked a 53% fall in profit. Droughts have dried up its sales. That sent its stock tumbling 14%; Australia’s All Ordinaries stock index is down .26%
  • Some people are blaming the poor showing of a US housing indicator. We’re not so sure. While pending home sales fell .4% in February, much of that was the decline in foreclosure and short sales; conventional sales continued to rise.

Not a great day—not that we believe in bad omens or anything.