China exposure to US subprime ills limited

CHINA HAS only limited exposure to problems in the U.S. subprime market, and its commercial banks have set aside adequate provisions for dealing with the problems, an assistant central bank governor said yesterday.

Yi Gang’s comments came after banks such as Bank of China and Construction Bank recently revealed their exposure to the subprime crisis, sending their shares lower.

“Our commercial banks are making very cautious management decisions and have made adequate provisions for any possible risks,” Yi said.

Bank of China said it held $8.965 billion in U.S. subprime mortgage-backed loans by the end of June.

Industrial and Commercial Bank of China reported a holding of $1.22 billion and China Construction Bank said it had $1.06 billion.

Bank of Communications , China Merchants Bank and China CITIC Bank reported zero exposure to subprime related products.

Yi said the Chinese central bank believed market confidence was recovering, and the People’s Bank of China did not see any immediate signs of the subprime crisis worsening. He also told a forum that the planned issue of 1.55 trillion yuan in special bonds to fund the country’s state investment agency would help the central bank moderately tighten policy, while keeping a basically stable policy stance.

Yi said the Ministry of Finance, the People’s Bank of China and other related government institutions were working to ensure market stability amid the massive issuance.

He said China’s foreign exchange system was moving towards a market-based one.

Reuters

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Australia Cenbank to provide liquidity as needed

Australia’s centr- al bank on said yesterday it had scope to provide more liquidity to the banking system if needed, though it noted some encouraging signs that the recent squeeze on credit was loosening.

In a speech on its market operations, Reserve Bank of Australia (RBA) Deputy Governor Ric Battellino said that while some stresses remained, the injection of extra cash had helped ease upward pressure on market interest rates.

“In recent days, there have been some encouraging signs of improvement in markets, both here in Australia and overseas,” Battellino told a finance conference.

“The Bank will continue to monitor the situation carefully,” he added. “If market developments warrant, the Bank has scope to further expand the provision of liquidity.” Battellino emphasised that the RBA’s measures, and those from other central banks, should not be seen as as an attempt to “bail out” banks and markets.

“The measures have been technical operations aimed at breaking up the log jams in money markets and encouraging funds to flow again, in order to prevent monetary conditions becoming tighter,” he said.

The RBA has been injecting extra cash into the domestic banking system since Aug. 10, when the spillover from the U.S. subprime mess caused a near seizure in money markets.

Reuters

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Vietnam industrial output to rise 17 pct

VIETNAM’S JANUARY to August industrial output is expected to rise 17.1 percent from a year earlier to 377.07 trillion dong ($23.3 billion), but crude oil production has slowed, the government said on Tuesday.

The industrial sector, making up a third of Vietnam’s economy, helped lift gross domestic product by 7.87 percent in the first half of the year from the same period a year earlier.

But crude oil production during the first eight months is expected to fall 8 percent from the same period last year to 10.38 million tonnes, or 313,100 barrels per day, the government’s General Statistics Office said in a monthly report.

Crude’s decline “does not only affect greatly the export growth and state budget income but also has an impact on the industrial sector’s contribution to the eight-month gross domestic product growth”, it said, without giving details. Crude exports, Vietnam’s top foreign exchange earner, in January-to-August fell 11.8 percent from a year earlier to $5.1 billion, the statistics office said.

However, production of cars, machinery and air-conditioners in the eight-month period extended the strong growth since the start of the year, rising by between 60 percent and 70.2 percent from a year earlier.

The state sector was estimated to grow 10.2 percent during the first eight months, up from 9.7 percent in the January-to-July period. Reuters

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BOJ July minutes need to watch subprime problems

BANK of Japan policy board members agreed in early July that there was uncertainty in the outlook for adjustments in the U.S. housing markets due to subprime mortgage problems, minutes of the central bank’s July 11-12 meeting showed on Tuesday.

“Some members said it was not highly likely that the subprime loan problems would severely affect credit markets, but if that were to happen, (we) can’t deny the possibility that global financial and economic conditions could be badly affected,” the minutes of the meeting showed.

The nine-member board agreed by an 8-1 vote at the meeting to keep the overnight call rate target at 0.50 percent, with board member Atsushi Mizuno the sole dissenter.

Reuters