Month: June 2013

I really like stocks, gold has seen its worst: Gartman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Dennis Gartman, The Gartman Letter, explains why he is now sitting “on the sidelines” on the gold play, and why he thinks stocks are likely on an upward trend.

The stock market will go a “good deal higher,” Dennis Gartman, founder of The Gartman Letter, told CNBC on Friday, adding it’s no longer time to be short gold.

“I’ve been very fortunately short of gold, long on stocks and long on crude oil—a rather complicated trade that worked out reasonably well,” Gartman said in a “Squawk Box” interview, saying gold has probably “seen its worst” in the recent selloff in which the precious metal in Friday trading fell to its lowest level since 2010 to under USD 1,200 an ounce.

“I’m not sure that I want to step up and buy gold,” he continued, “but the time to be short of it is passed. I have been openly bearish of gold for some period of time. … [but] I think it’s time to go to the sidelines.”

As for stocks, Gartman predicted the major trend is still upward.

“I like them a lot,” he continued, saying stocks have taken comfort in this week’s comments from several regional Federal Reserve presidents, including William Dudley, the New York Fed president, on Thursday.

Dudley defended Ben Bernanke’s comments last week—claiming the Fed chairman was “very clear” when he said scaling back the central bank’s USD 85 billion-a-month bond purchases could start later this year provided the economy continues to improve. The spike in bond yields on concerns of an earlier tapering has been an overreaction, he continued.

Dudley and other Fed presidents have recently made it “abundantly clear the Fed is going to be there for quite some period of time in the future, adding reserves to the system as long as the economic data demands,” Gartman contended. “So I think we have to take them at their word, and that means higher prices as [stock] shares are concerned.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What slowdown? Rich Europeans only getting richer

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Europe’s top economies may be stalled, but the region’s super wealthy posted strong wealth gains in 2012, according to a new study.

The report, from Wealth-X, a wealth research firm, said the number of people worth USD 30 million or more in Germany, Switzerland, France and Italy grew six percent in 2012. Their combined fortunes surged 13 percent to USD 3.4 trillion.

Germany posted the strongest gains, with the ultra-wealthy growing six percent to 16,734, with total fortunes of more than USD 2 trillion. Switzerland’s ultra-rich saw their fortunes grow 15 percent.

Even France—often portrayed as the country of wealth flight rather than wealth creation—saw its super-wealthy population grow five percent and fortunes gain 12 percent.

Wealth-X attributed the improvements to smart investing. “Smart investments and prudent estate planning among the UHNW (ultra-high-net worth) individuals in these economies explain why they performed better than other European nations in the current economic climate,” said Wealth-X President David Friedman.

Foreign buyers purchased USD 82 billion worth of real estate in the past year, reports CNBC’s Robert Frank.

Yet there may be another reason: globalization. Many of the ultra-rich in European countries own global businesses or companies that benefit from growth in other countries, making them far less dependent on their home countries.

Many luxury companies in France, top manufacturers in Germany and design firms in Italy have decoupled from Europe and continue to see sales growth from China, the US and other (relatively) stronger economies.

Just consider Amancio Ortega, the founder of Spanish clothing chain Zara. Spain is hurting, but Ortega’s wealth has soared by more than USD 10 billion over the past year to more than USD 50 billion. That makes him among the five richest men in the world.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Dirty underside to doing business in China’ Starnes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Forty-two-year-old American businessman Chip Starnes arrived at Newark International Airport in New Jersey, on Thursday evening, ending seven days of captivity in a Chinese factory. CNBC met him at the airport for an exclusive interview.

“There is a dirty underside to doing business in China, there`s no doubt about that and I don`t think that`s a secret either,” Starnes said at the airport but added that, “going back to China is a must. We`ve got millions of dollars in equipment there, large investments there, we`ve got to see it through.”

Starnes, president of Florida-based Specialty Medical Supplies, was released after a pay dispute was settled with workers at the company`s plant in the Beijing suburb of Huairou where he was held captive.

Starnes described the last night of negotiations as chaotic.  “The way it went about was just as chaotic as it was the first night last Friday (June 21) . Hundreds of people – family and friends- people smoking everywhere, I don`t know what`s going on, I`m just saying okay, whatever.”

After settling the dispute, local officials placed Starnes in a car to head back to his hotel. Starnes later told CNBC that he switched cars and headed for the airport, accompanied by his lawyers.

Chu Lixian, head of the rights and interests department of the Huairou District Labor Union confirmed that the dispute had been resolved, Reuters reported.

“I tried to downplay it over on the China side but I`m really, really extremely upset that the government, nobody really stepped in to help or do anything to solve the situation. I felt like I was an animal in a zoo,” Starnes said upon touching down in the U.S.

When asked what his next move was, Starnes replied that he would be back in the office on Friday. “We`re supposed to be signing new contracts with people who want to come back and work [at the plant in China].The new ones that worked there previously, they have already been paid a severance package and the new contracts will outline that if something were to happen, they would not be paid a second severance package.”

On Wednesday, Starnes – who has done business in Beijing for the last 20 years – told CNBC that he was being forced to pay severance packages to people who still have jobs at the plant.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Brutal quarter for Asia: Here’s the scorecard

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It`s been a brutal quarter for Asian equity markets that have seen a sharp withdrawal of funds over April-June, driven by concerns over a scaling back of the US Federal Reserve`s bond buying program and financial instability in China.

“The Fed is responsible for 80 percent of the sell-off – I think for the remainder it is China concerns. Clearly something is not right in China, and no one knows how to identify it because of the opacity of the political system and the economy,” Mark Matthews, head of research Asia at Julius Baer told CNBC, referring to the liquidity crunch in the world`s second largest economy.

Greater China markets have led the losses with the Shanghai Composite (Shanghai Stock Exchange: .SSEC-SZ) and Hang Seng Index (Hong Kong Stock Exchange: .HSI-HK) falling 12 percent and 7.2 percent, respectively, over the June quarter. The heavy selling in mainland markets spilled over to top trading partner Australia`s SandP/ASX 200 index (ASX: .AXJO-AU), which declined over 3 percent, hurt by a slump in resource stocks.

Meantime, the once “darling of investors” Southeast Asian markets fell victim to heavy selling, with the Philippines, Thailand and Indonesian stock markets declining as much as 7 percent.

In the face of rising risk aversion, crowded markets with high valuations have come under increased scrutiny, driving the sell-off, said Kelvin Tay, regional chief investment officer for Southern Asia Pacific at UBS Wealth Management.

Southeast Asia has been a target of hot money flows triggered by the US Federal Reserve`s ultra-loose monetary policy. Thus, alongside the weakness in stocks, the region has also seen a rapid withdrawal of funds from its government bond markets, which has in turn weighed on currencies.

Japanese stocks, by contrast, have remained the most resilient amid the rout in Asian markets. While the index has erased a large portion of the year`s gains due to concerns over Prime Minister Shinzo Abe`s longer-term growth strategy and strength in the yen (Exchange: JPY=), the Nikkei 225 rose 10.3 percent in the second quarter.

Looking Ahead

And experts believe the divergence in performance between Japan and the rest of Asia will continue in the coming quarter.

“There has been a major trend change in the last month – emerging markets are no longer the stars. There are no really good stories left in Asia. The Southeast Asia story is a few years old, a little stale,” said Matthews.

“The money will continue to drip out of here, but not in as much of a big wave as it did in June. The story will be much more about a U.S. recovery and Japan will get back on track.” he added.

Stan Shamu, market strategist at trading firm IG Markets, agrees that Japanese equities will gain traction in the coming months.

“Japan will likely counter weakness we are seeing in China. If upper house elections go well in July, we can be confident current regime will push on with current polices and we`ll see Japan stocks recover,” he said.

The high stakes upper house elections are scheduled to take place on July 21. If Abe`s Liberal Democratic Party (LDP) wins a majority in the upper house, it could make it much easier to pass through legislation dealing with corporate tax reform and deregulation.

Tay of UBS recommends gradually building exposure to Asian equities over the next six months, with a 12-18 month investment horizon.

He is most bullish on South Korea and India markets noting that the former is highly leveraged to the recovery in the U.S., while the latter is attractively valued.

By CNBC`s Ansuya Harjani

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fed tapering? Here’s why it may not happen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The US Federal Reserve`s plan to taper its massive monthly bond buying program later this year may not materialize after all, says one strategist.

Viktor Shvets, head of Asian strategy at Macquarie Securities Group, said the US economy is unlikely to improve enough to allow the Fed to stop pumping in liquidity.

“As long as inflation doesn`t pick up… GDP (gross domestic product) growth rates [don`t] get anywhere near 3-3.5 percent, [and] unemployment will not fall significantly below 6-6.5 percent … you are not going to have any tapering,” Shvets told CNBC on Friday.

The US first quarter GDP growth data , reported this week, proved more tepid than hoped at 1.8 percent, while the unemployment rate is around 7.6 percent and inflation is at a tame 1.4 percent.

According to Shvets inflation in the world`s largest economy will not pick up for the next few years.

“So long as the velocity of money remains slow…the fact that the Fed is not adding to what it`s buying means its already withdrawing effectively…there is not going to be any inflation at all. In fact deflation is a much more serious issue than inflation….all the wounds will heal but not this year, next year or the year after that,” he added.

Hints from the Fed Chief Ben Bernanke that it may start winding down its USD 85 billion a month quantitative easing (QE) by end 2013 and altogether stop the stimulus in 2014 have sent financial markets into a free fall in recent weeks, with emerging markets being particularly hard hit.

However, some calm was restored after two Federal Reserve policymakers said Thursday that U.S. monetary stimulus would not be fading anytime soon. Their comments that market expectations were “out of sync” with Fed policy led the Dow Jones Industrial Average to triple digit gains.

Equity Markets in Asia were also higher Friday on cue, with the Japanese Nikkei gaining as much as much as 3.3 percent in early trade.

Shvets further argued that it would be too dangerous for the Fed to take away the punch bowl because the global economy as a whole is too highly leveraged.

Furthermore, if the Fed were to tighten monetary policy even slightly, other major central banks could step in to compensate, he added.

“Developed markets are leveraged four to one, emerging markets are now leveraged 2.5 to one – you cannot withdraw liquidity. If the Fed is going to withdraw anything it`s going to be a minute amount and on top of that other central banks that will inject more liquidity will be Bank of England or the European Central Bank,” he added.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Brutal quarter for Asia stocks: Here’s the score card

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

It’s been a brutal quarter for Asian equity markets that have seen a sharp withdrawal of funds over April-June, driven by concerns over a scaling back of the US Federal Reserve’s bond buying program and financial instability in China.

“The Fed is responsible for 80 percent of the sell-off – I think for the remainder it is China concerns. Clearly something is not right in China, and no one knows how to identify it because of the opacity of the political system and the economy,” Mark Matthews, head of research Asia at Julius Baer told CNBC, referring to the liquidity crunch in the world’s second largest economy.

Greater China markets have led the losses with the Shanghai Composite and Hang Seng Index falling 15 percent and 9 percent, respectively, over the June quarter. The heavy selling in mainland markets spilled over to top trading partner Australia’s S&P/ASX 200 index, which declined 3.7 percent, hurt by a slump in resource stocks.

Meantime, the once “darling of investors” Southeast Asian markets fell victim to heavy selling, with the Philippines, Thailand and Indonesian stock markets declining between 5 percent and 8 percent.

In the face of rising risk aversion, crowded markets with high valuations have come under increased scrutiny, driving the sell-off, said Kelvin Tay, regional chief investment officer for Southern Asia Pacific at UBS Wealth Management.

Southeast Asia has been a target of hot money flows triggered by the U.S. Federal Reserve’s ultra-loose monetary policy. Thus, alongside the weakness in stocks, the region has also seen a rapid withdrawal of funds from its government bond markets, which has in turn weighed on currencies.

Japanese stocks, by contrast, have remained the most resilient amid the rout in Asian markets. While the index has erased a large portion of the year’s gains due to concerns over Prime Minister Shinzo Abe’s longer-term growth strategy and strength in the yen, the Nikkei 225 rose 5.8 percent in the second quarter.

Looking Ahead

And experts believe the divergence in performance between Japan and the rest of Asia will continue in the coming quarter.

“There has been a major trend change in the last month – emerging markets are no longer the stars. There are no really good stories left in Asia. The Southeast Asia story is a few years old, a little stale,” said Matthews.

“The money will continue to drip out of here, but not in as much of a big wave as it did in June. The story will be much more about a US recovery and Japan will get back on track.” he added.

 Stan Shamu, market strategist at trading firm IG Markets, agrees that Japanese equities will gain traction in the coming months.

“Japan will likely counter weakness we are seeing in China. If upper house elections go well in July, we can be confident current regime will push on with current polices and we’ll see Japan stocks recover,” he said.

The high stakes upper house elections are scheduled to take place on July 21. If Abe’s Liberal Democratic Party (LDP) wins a majority in the upper house, it could make it much easier to pass through legislation dealing with corporate tax reform and deregulation.

Tay of UBS recommends gradually building exposure to Asian equities over the next six months, with a 12-18 month investment horizon.

He is most bullish on South Korea and India markets noting that the former is highly leveraged to the recovery in the U.S., while the latter is attractively valued.

By CNBC’s Ansuya Harjani

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fed tapering? Here’s why it may not happen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The US Federal Reserve’s plan to taper its massive monthly bond buying program later this year may not materialize after all, says one strategist.

Viktor Shvets, head of Asian strategy at Macquarie Securities Group, said the US economy is unlikely to improve enough to allow the Fed to stop pumping in liquidity.

Also read: Wall St rallies for 3rd day as Fed angst ebbs, Dow up 114

“As long as inflation doesn’t pick up… GDP [gross domestic product] growth rates [don’t] get anywhere near 3-3.5 percent, [and] unemployment will not fall significantly below 6-6.5 percent … you are not going to have any tapering,” Shvets told CNBC on Friday.

The US first quarter GDP growth data, reported this week, proved more tepid than hoped at 1.8 percent, while the unemployment rate is around 7.6 percent and inflation is at a tame 1.4 percent.

According to Shvets inflation in the world’s largest economy will not pick up for the next few years.

“So long as the velocity of money remains slow…the fact that the Fed is not adding to what it’s buying means its already withdrawing effectively…there is not going to be any inflation at all. In fact deflation is a much more serious issue than inflation….all the wounds will heal but not this year, next year or the year after that,” he added.

Hints from the Fed Chief Ben Bernanke that it may start winding down its $85 billion a month quantitative easing (QE) by end 2013 and altogether stop the stimulus in 2014 have sent financial markets into a free fall in recent weeks, with emerging markets being particularly hard hit.

However, some calm was restored after two Federal Reserve policymakers said Thursday that U.S. monetary stimulus would not be fading anytime soon. Their comments that market expectations were “out of sync” with Fed policy led the Dow Jones Industrial Average to triple digit gains.

Equity Markets in Asia were also higher Friday on cue, with the Japanese Nikkei gaining as much as much as 3.3 percent in early trade.

Shvets further argued that it would be too dangerous for the Fed to take away the punch bowl because the global economy as a whole is too highly leveraged.

Furthermore, if the Fed were to tighten monetary policy even slightly, other major central banks could step in to compensate, he added.

“Developed markets are leveraged four to one, emerging markets are now leveraged 2.5 to one – you cannot withdraw liquidity. If the Fed is going to withdraw anything it’s going to be a minute amount and on top of that other central banks that will inject more liquidity will be Bank of England or the European Central Bank,” he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Can Rudd Stop the Rout in the Australia Dollar?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The swearing in of Kevin Rudd on Thursday for a second time as Australia`s prime minister brought some relief to the Australian dollar, which hit a one-week high on the news.

With Rudd taking over the reins, after toppling Julia Gillard from the Labor Party leadership, just about three months ahead of scheduled elections there is speculation whether he will change the date of the September 14 polls.

Given this uncertainty, the Reserve Bank of Australia (RBA) is unlikely to cut interest rates in the near-term which could give a boost to the Aussie dollar, which is down more than 10 percent since the start of the year, experts said.

Paul Bloxham, chief Australia and New Zealand economist at HSBC said the timing of an upcoming election could impact the RBA`s decision on whether or not to change monetary policy.

“The uncertainty about the timing of the forthcoming election could affect the RBA`s willingness to make near term policy moves unless urgently required,” Bloxham said in a note. “On the margin, this makes a near-term cut to interest rates a bit less likely.”

Australian bank ANZ backed that sentiment, saying the timing of the election date may have implications for future interest rate moves. The election can be called as early as August 3 or could be postponed up until November 30 by Rudd.

“We continue to think that the RBA is likely to steer clear of lowering rates during an election campaign if it is possible,” ANZ Research said in a note.

The central bank left its key interest rate unchanged in June after cutting rates by 25 basis points in May to a record low of 2.75 percent, but it has maintained its bias towards easing to boost the economy if needed. The RBA has slashed interest rates by 200 basis points since late 2011 to boost a weak domestic economy.

Eric Viloria, senior currency strategist at Gain Capital Group said even though the Aussie dollar looks “stabilized” since news of the leadership change came, the currency still faces a lot of headwinds like the RBA`s easing bias.

“We think it`s likely that they`re [RBA] probably going to stay on hold, [but] they`re probably going to maintain that easing bias and leave the door open for further rate cuts, and while that easing bias is there, that`s something that would weigh on the Australian dollar,” Viloria told CNBC.

The Australian dollar, meanwhile, has been edging higher – up 1.5 percent since hitting a yearly low of 0.9185 last Thursday. Falling commodity prices, a slowdown in Australia`s largest trading partner China and the prospects of tapering of stimulus in the U.S. have weighed on the currency this year, which has been on a bull run from 2009 to the end of last year, rising over 52 percent.

According to David Forrester, senior vice president, G-10 forex strategy at Macquarie, the Aussie dollar will continue to be driven by international events, and the political landscape in Australia will have a limited impact on its movements.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Banking reform deal is in sight, says EU’s Rehn

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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European ministers are likely to reach a deal on banking reform when they meet on Wednesday, the European Union’s economic and monetary affairs commissioner Olli Rehn told CNBC.

Wednesday’s meeting follows 20 hours of talks over the weekend, when European finance ministers attempted to thrash out details on how bank restructuring should be paid for. The officials agreed to regroup ahead of a two-day EU summit starting on Thursday, after no concrete decision was made.

“I believe we have a fair chance of reaching an agreement on Wednesday… I hope so. It will be very important to maintain the momentum now,” Rehn told CNBC. “It is now important to do everything we can in order to finalize the negotiations towards the banking union.”

The agreement will be an important step towards achieving a European banking union, a political vision first laid out a year ago in the hope of achieving a more widely integrated and tightly regulated European banking sector.

As ministers struggled to agree on the details over the weekend, the main points of contention were reported to be the order in which investors and creditors should pay for bank restructuring, and whether or not savers with more than 100,000 euros (USD 131,204) should be included.

“I think we have made good progress in the past week,” said Rehn. “We have an agreement on the principles and rules on the direct recapitalization of banks, and… made progress on the issue of the Bank Recovery and Resolution Directive, even if the deal isn’t yet completely sealed,” he added, referring to a directive first published a year ago designed to establish a framework for the recovery and resolution of banks and investment firms in the EU. An agreement should bring certainty to financial markets, which have been volatile amid uncertainty over the talks. Yields on Spanish 10-year bonds, for example, have surged above 5 percent this week, their highest level since the start of April.

Rehn said the pick-up in European government bond yields was a reminder of the fragility of the European economic situation.

“I believe the pick-up in bond yields is a reminder of the fragility of the situation in the European economy… We have to finalize the work on the banking union and we have to pursue economic reforms in the member states so that we can build foundations for sustainable growth and job creation in Europe,” he added.

Deliberations over a banking union in Europe have been partly overshadowed this week by the fallout from the Federal Reserve Chairman Ben Bernanke’s potential tapering of his $85 billion a month quantitative easing programme, which has prompted a widespread sell-off across global equity markets.

Rehn told CNBC the situation in the US had emphasized the importance for European policymakers to ‘stay alert’.

“This is indeed a reminder that we have to make sure we don’t resort to complacency in Europe… We all have to stay alert now in regards to the impact (this will have) on the future… it’s important for the global economy. In the EU we have to stay on the reform course and ensure we do everything we can to ensure a recovery,” he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is China right to brush aside credit squeeze?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China’s central bank is right to stand its ground even as its decision to tolerate a credit squeeze that raises the prospect of slower growth in the world’s second biggest economy rattles markets, strategists told CNBC.

“We think the PBOC (People’s Bank of China) is doing the right thing, to prick a bubble before it’s too late,” Kelvin Chan, head of country research at Euromonitor International told CNBC Asia’s ‘Squawk Box’.

Rampant credit growth is seen as one of the biggest risks facing China’s economy. According to research from Credit Suisse, China’s credit-to-gross domestic product (GDP) ratio surged to more than 170 percent last year from just over 110 percent in 2008.

Ratings agency Fitch has warned that the scale of credit in the economy was so extreme that it would find it difficult to grow its way out of the excesses.

“There’s always a risk in terms of miscalculation, but if China has any kind of real chance to fix its problems, and we all know that China is sick in its credit system, then they (policymakers) better do it now rather than later,” Chan added.

Local lenders in China have faced a severe liquidity strain in recent weeks, with interbank lending rates hitting double digits last week, raising concern that efforts to rein in credit growth and steer the economy away from a dependence on credit-driven investment could go wrong.

The jitters have spilled over into China’s stock market, which slumped more than 5 percent in its worst one-day sell-off in almost four years on Monday and extended its falls on Tuesday to its lowest levels in more than four years.

China’s seven-day repo rate, a gauge of the availability of funds in the interbank market, remains high at around 7 percent on Tuesday although it has eased back from a record high hit last week above 10 percent.

“At least we’ve had some pull back in money market rates and I suspect that they (central bankers) will be able to fine tune their policy in the next few months. For the most part the lending numbers have been strong this year, but I’m not panicking,” said Sean Callow, senior currency strategist at Westpac Bank in Sydney.

According to Michael Ivanovitch, president of economic research firm MSI Global, “They’ve (PBOC) known for some time about the problems in the shadow banking system and have tried to remedy the problems. Obviously it’s not an easy task. Financial markets are sensitive and the PBOC probably wanted to send a message – we’ll tolerate no nonsense any more, you guys are on your own.”

China watchers added that the central bank, while keen to see banks gain a tighter control over credit growth, would not allow the tight liquidity conditions to develop into a banking crisis that could destabilize the economy.

“The idea here is they don`t want to see banks fail, they have the ability to step in above board or clandestinely and inject targeted liquidity into companies and into certain sectors, so they can manage this pretty well,” said Leland Miller, president of US-based China Beige Book International.

Euromonitor`s Chan agreed, saying: “Right now we are confident that they can fix the problem. They still have a few tools that they can take out and use to ease liquidity conditions if they need to.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow