Concern over China's high debt levels as it could be recipe for another financial crisis

SINGAPORE’s Oversea-Chinese Banking Corp’s (OCBC) move to buy Hong Kong-based Wing Hang Bank further seals its enlarged footprint in Asia.

Not only will it help to bridge the gap between OCBC and DBS Bank, which had bought Hong Kong’s Dao Heng Bank for US$5.8bil (RM18.94bil) in 2001, but will also boost the offshore yuan business.

OCBC is in exclusive talks with Wing Hang Bank for a deal nearly twice the book value at S$5.3bil (RM13.65bil), said Reuters, quoting sources.

There have been few banking mergers and acquisitions in Asia; most notable is Australia & New Zealand Banking Group Ltd with the AMMB group, and CIMB Group Holdings Bhd with the Australian business of the Royal Bank of Scotland.

Back in 2009, OCBC had bought the private business of the ING Group.

Earlier, Hong Leong Bank Bhd had bought into China-based Bank of Chengdu and CIMB into Bank of Yingkou.

OCBC’s sealing of this deal will enhance Asia as a hub for business in forex, commodities trading and investment.

The tumble in prices of penny stocks on Singapore Exchange Ltd (SGX) has had a lasting impact on an exchange that prides itself on the highest of standards.

A public consultation is being planned in the next few weeks in what could be considered the widest ranging review of Singapore’s capital markets since the financial crisis of 2008, said the Singapore Business Times.

Among the improved sanctions are the setting up of an independent listing committee, the implementation of tighter listing standards and the granting of stronger enforcement powers to the SGX.

Reviews like these are mostly done after something major happens.

Still, it is better late than never.

Penny stocks are always dicey to deal with, and investors should view them carefully with fundamentals in mind.

China, in grappling with its high debt levels, is imposing guidelines on shadow banking of high-yielding wealth-management products, said Reuters.

Fearing the use of short-term money to finance these longer-term products, China is disallowing trust companies to engage in “credit-type” businesses.

A lot of the riskier off-balance sheet transactions are conducted via these trust companies.

China’s local Government debt had reached 17.9 trillion yuan as at end-June 2013, up from 10.7 trillion as at end-2010, reported Reuters.

China’s ratio of total debt-to-gross domestic product (GDP), including government, corporate and household debt, was set to reach 218% of GDP by end-2013, up 87 percentage points since 2008, said Reuters, quoting rating agency Fitch Ratings.

This debt level may be lower than the United States or Japan, but it is a positive move by the Chinese Government to control it.

Economists have warned that such high debt levels could contribute to financial crises.

Columnist Yap Leng Kuen supports all efforts to ward off financial crises.