Zero Hedge: Guest Post: Some Bubble Snapshots and Schizophrenic Five Year Plans

From Zero Hedge:

Despite governments dictating more loan-loss provisioning, China (and Korea and India) has little capital to assets. Loan growth and poor provisioning in China and India are giving off warning signs.

Asset quality is the crux of a bubble. Deteriorating asset quality creates balance sheet mismatches. Just as investors “reach for yield”, the first banks in on low quality loans show strong returns, so the whole banking sector joins in. Thus an imperfect indicator of declining asset quality is a high loans/total assets ratio. Vulnerability happens when loans season and NPLs creep up. Then banks need cash. When they don’t provision for losses you get a meltdown.

China, Korea, and India have extremely low capital provisioning for this contingency.

The Korean consumer sector looks shaky, although corporate balance sheets are much stronger and contribute to the high deposits to GDP in the first chart. A lot of Korean valuations are sky high and ready for a long drop.

http://www.zerohedge.com/article/guest-post-some-bubble-snapshots-and-schizophrenic-five-year-plans