ML-Implode News - China Bank Bailout Calls Grow Louder as Markets Seen Vulnerable

What was once the fringe view of permabears and short sellers is now increasingly being adopted by economistsÂ at some of the world's biggest banks and brokerages. Nine of 15 respondents in a Bloomberg survey at the end of last month, including Standard Chartered Plc and Commonwealth Bank of Australia, predicted a government-funded recapitalization will take place within two years. Among those who provided estimates of the cost, a majority said it will exceed $500 billion.
While a bailout of that size would be a far cry from the $10 trillion forecast of U.S. hedge fund manager Kyle Bass in February, the responses reflect widespread concern that Chinese lenders will struggle to cope as bad loans surge. Even as some analysts said a state recapitalization would put the banking system on a stronger footing, 80 percent of respondents predicted news of a rescue would weigh on Chinese markets -- dragging down bank stocks and the yuan while pushing up government borrowing costs and credit risk.

"A recapitalization will happen after the Chinese government comes clean with the true nonperforming loan figure," said Kevin Lai, the Hong Kong-based chief economist for Asia ex-Japan at Daiwa Capital Markets. "That will require a lot of money creation."

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China Bank Bailout Calls Grow Louder as Markets Seen Vulnerable