Good morning

The headlines:

  1. For a while now, there has been a lot of talk about Chinese home prices and a “hard landing”. The IMF’s Zhu Min (a deputy managing director) emerged over the weekend to tell everyone that China is heading for a “soft landing”. “Even as government data showed property prices falling in most of the nation’s biggest cities”. And sometimes, I think that these news pieces haven’t yet been translated from the original mandarin, because I’m regularly left so awkwardly confused. So to start: the property prices. The Chinese government has been running a 2 year campaign to reduce the price of housing (Premier Jin Bao says that current prices are “far from reasonable”). This has been done by dampening demand (higher down-payments required on mortgages and purchase restrictions); and by instituting low-cost housing construction projects. In the grand scheme of things – these restrictive policies will restrict economic growth. Which leads to the concept of a “hard landing” – from what I can tell, this would be a sudden and dramatic economic retraction (eg. growth rates dropping from 8.9% down to zero, or something like that). Jargon. Oi vey. Link: China’s Home Prices Fall.
  2. Last week, the Fed approved Goldman Sach’s plan to increase its dividend and repurchase shares. This decision has been criticised, with former regulator Sheila Bair pointing out that no distribution should be approved that would bring a bank’s leverage ratio below 4%. Currently, the Federal limit is 3%. A leverage ratio of 4% means that the bank’s liabilities exceed its capital reserves by 25 to 1. In the event of a crisis, this would almost certainly result in a bank run. Goldman Sachs (as well as Morgan Stanley) were in the same leverage ratio range as Citigroup (who failed the stress tests); but the capital plans of GS and MS were both approved. Link: Goldman should be barred from returning capital.
  3. UPS has agreed to purchase TNT express. Or, rather, TNT has agreed to be purchased – at 9.5 euros per share, this values TNT at around $6.9 billion. The deal gives UPS a much better foothold in Europe – making it roughly around the same size as its competitors. So prepare for more amazon deliveries right to your European door. Link: UPS and TNT.
  4. The Africa Business News in brief. Link: ABN Briefs. The highlights:
    • Kenya has opened up 8 new offshore oil blocks for leasing to exploration firms.
    • Rwanda’s Central Bank has kept its key lending rate unchanged at 7%.
    • South Africa has conditionally approved of Glencore’s takeover of Optimum Coal (a $1.3 billion transaction).
That’s all for now.
Have a great Monday!