IMPORTANT NOTICE :
NEVER trust wiring or ACH instructions sent via email. ALWAYS confirm with the sender by phone or in-person. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. These emails are convincing, sophisticated, and often appear to come from someone you know or work with. Always independently confirm wiring or ACH instructions in-person or via a telephone call to a trusted and verified phone number. NEVER wire or ACH money without double-checking that the wiring or ACH instructions are correct.
The Weekly Economic & Market Recap
July 19, 2019
Earlier this week China announced its second quarter GDP figure, which was up 6.2% on an annualized basis, but was the slowest pace of growth in 27 years. The headwinds facing China are formidable and range from$250 billion of trade tariffs being imposed on their exports by the U.S., to overwhelming debt loads that were largely amassed after the financial crisis to assist in hitting growth targets. The rapid growth of Chinese corporate debt was staggering. In 2007, corporate debt to GDP was 101 percent and over the course of 10 years it ballooned to 160% of GDP. To deal with the excessive debt issue, China embarked on a deleveraging campaign and cracked down on the shadow banking sector, which made it more difficult for certain firms to raise funds to repay their liabilities. The shortage of funding caused defaults to more than quadruple from 2017 to 2018 to a record amount. Increasing credit risk has caused a lot of lenders to avoid extending credit to smaller private companies. The Chinese government has taken notice and cut the required reserve ratio for banks numerous times this year and has encouraged lenders to extend credit to smaller firms. However, as Chinese economic growth decelerates, funding issues are expected to become more pronounced for weaker companies and should lead to repayment pressures that should exacerbate the default cycle. But, the market is not expecting China to have a rough economic landing as its 5-yr sovereign credit default swap trades at a very low 42 basis points, which is well below the high of 248 basis points that was recorded back in February of 2009. Even though the issues facing China are significant, it is our belief that Chinese officials will be able to provide the necessary stimulus in the near term to keep their economy moving forward in a controlled direction.
Click below to listen to this week's Peapack Private Wealth Management Market Report as heard on WCBS NewsRadio 880.