Ernst & Young Withdraws Chinese Loans Report

Elena
15 May, 2006
New York City

Ernst & Young withdrew a report suggesting that China

[R]8:00 AM Ernst & Young withdrew a report on China’s banks’ loans.[/R]
Ernst & Young, international accounting company, declared a report on China’s banks’ loans invalid as upon further research, the firm found that the data provided were factually erroneous.

Ernst & Young had earlier issued a report suggesting that China’s banks had accumulated bad loans for up to $911 billion, but having revised the figures, the firm stated that this number cannot be supported. The Ernst & Young report put the amount of nonperforming loans held by the ‘Big Four’ state banks at $385 billion. Two of those banks, the Bank of China and the Industrial and Commercial Bank of China are planning to sell shares to international investors in massive initial public offerings in Hong Kong. China''s official estimate of the amount of nonperforming loans held by its four big state banks is $133 billion. The figure is much lower than in years past due to massive write-offs of bad loans left over from years of lending to insolvent state industries and economically unsound construction projects.

Monday morning the yuan's official rate was set at 7.9982 yuan per dollar, breaking through the psychologically important level of 8.0 yuan for the first time in more than a decade. Traders consider that this move might signal Beijing's willingness to allow its currency to appreciate faster.

[R]7:30 AM Asian shares closed down led by Nikkei.[/R]
Asian benchmarks finished lower Monday with Japan’s Nikkei down for the fifth consecutive session, losing 199.52 points down, or 1.2% to close at 16,402.26 with significant drops in brokerage and export shares. Automakers led the decliners with Honda Motor down 2.6% and Toyota Motor slipping 2.2%. Shares of Softbank rose 3.9% on the news that the internet company was developing new products together with Apple. South Korea's Kospi index was the biggest loser, dropping as much as 2.6%. Hong Kong's Hang Seng Index slipped as much as 1.8% to 16,595.58. The Shanghai Composite Index beat the trend, advancing 2.6% to a two-year high after the yuan passed the eight-per-dollar mark on Monday. On Friday, the benchmark which tracks both A and B shares, rallied 4.2%, totaling a weekly advance of 11.3%.


[R]6:30AM Europe tumbles in early trading on inflation and interest rates.[/R]
European markets extended their losses in early trading, following worrisome news about the continuing rise of commodity prices and their impact on equity stocks. London’s FTSE 100 shed 1% in early trading, Frankfurt’s Xetra Dax slid 0.9 %, the French CAC 40 declined 1.1%. Oil stocks dropped in Europe following the fall in crude prices due to reports that the surging energy costs would affect global demand and consumer sentiment. Norway’s Statoil fell 2.9 %, Total in France edged 1% down, and Repsol in Spain lost 1%. Financial stocks were also hit on fears of rising interest rates. France’s CNP Insurances fell 3.6% and Allied Irish Bank declined 2.8%.

Oil continued its decline as IEA on Friday outlined the risk of soaring energy costs hitting consumption. Light crude fell $1.19 to $70.85 a barrel by 3:34 a.m. EST, London Brent crude shed $1.48 to $70.84. Precious metals also fell, with gold losing $21.80 to $692.50 an ounce. The dollar braked the losing momentum in early trading on Monday, gaining ground on the euro and the yen due to the declining commodity futures such as gold and oil. The euro bought $1.2842, down from $1.2898 late Friday. The dollar edged up against the yen, standing at 110.21 yen from 109.95 yen in late Friday trading.