by ilene - January 3rd, 2012 1:43 pm
Courtesy of Patrick Chovanec
As the year comes to a close, and we look forward to 2012, I continue the tradition I started last year and offer a brief look at the top stories that shaped China’s business and economic climate in 2011:
1. High-Speed Rail. It was the best of times, it was the worst of times — China’s ambitious high-speed rail program embodied the highest highs and the lowest lows the country experienced this year. In January, President Obama cited the planned 20,000km network in his annual State of the Union address as a prime example of how America need to catch up to the Chinese. As if to prove his point, June saw the grand opening of the much-heralded Beijing-Shanghai line, timed to coincide with the Communist Party’s 90th anniversary celebrations. But even before then, there were signs of trouble on the horizon, starting in February when the powerful head of China’s railway ministry — the project’s godfather — was abruptly fired as part of a massive corruption scandal. Then a crash on a line near Wenzhou, in which at least 35 people were killed, unleashed a wave of fury on the Chinese internet, forcing the government to re-think the entire project amid charges of cover-up and sloppy construction. By November, with high-speed trains running at chronically low capacity and construction debts piling up, the railway ministry was asking Beijing for a rumored RMB 800 billion (US$ 126 billion) bailout just to pay the money it owed suppliers.
2. Inflation. Few issues preoccupied the average Chinese citizen — or Chinese policymakers — this year as much as rapidly rising prices. The consumer inflation rate, which began the year just shy of 5%,rose to 6.5% by July. The increase was led by food prices, particularly pork – a staple part of the Chinese diet — which skyrocketed by more than 50%. Keenly aware of the potential for popular unrest, Beijing made containing prices its top economic priority — even if that meant reining in growth. Throughout the year, the central bank repeatedly raised interest rates and bank reserve requirements, in an effort to bring the pace of credit expansion back under control. The powerful state planning bureau leaned heavily on Chinese companies not to raise prices, and even hit consumer goods giant Unilever with a stiff antitrust fine for publicly discussing possible price hikes. While CPI did decline to 4.2% by…
by ilene - July 24th, 2010 9:55 pm
David Rosenberg (the bear) takes a walk on the bullish side and here’s what he finds to be optimistic about. – Ilene
Courtesy of The Pragmatic Capitalist
Regular readers know I tend to focus on the negative aspects of the markets as opposed to the positives – anyone could put on a smile and skip through oncoming traffic, but the truth is, the investment world can be a very dangerous place so skipping along as if there are no risks involved is beyond foolish. But ignoring the positives is equally foolish. In this world of heightened market risks and particularly clear uncertainty here are 17 reasons to consider the bullish case (via David Rosenberg at Gluskin Sheff):
- Congress extending jobless benefits (yet again).
- Polls showing the GoP can take the House and the Senate in November.
- Some Democrats now want the tax hikes for 2011 to be delayed.
- Cap and trade is dead.
- Cameron’s popularity in the U.K. and market reaction there is setting an example for others regarding budgetary reform.
- China’s success in curbing its property bubble without bursting it.
- Growing confidence that the emerging markets, especially in Asia and Latin America, will be able to ‘decouple’ this time around. We heard this from more than just one CEO on our recent trip to NYC and Asian thumbprints were all over the positive news these past few weeks out of the likes of FedEx and UPS.
- Renewed stability in Eurozone debt and money markets – including successful bond auctions amongst the Club Med members.
- Clarity with respect to European bank vulnerability.
- Signs that consumer credit delinquency rates in the U.S. are rolling over.
- Mortgage delinquencies down five quarters in a row in California to a three-year low.
- The BP oil spill moving off the front pages.
- The financial regulation bill behind us and Goldman deciding to settle –more uncertainty out of the way.
- Widespread refutation of the ECRI as a leading indicator … even among the architects of the index! There is tremendous conviction now that a double-dip will be averted, even though 85% of the data releases in the past month have come in below expectations.
seasonliving up to expectations, especially among some key large-caps in the tech/industrial space – Microsoft, AT&T, CAT, and 3M are being viewed as game changers (especially 3M’s upped guidance).
by ilene - January 20th, 2010 1:56 pm
So China sees a potential bubble in stocks and real estate. That’s funny, I remember saying there was a property bubble in China just a couple of days ago…
Today is one of those days where investors reassess their sector exposure. The news that China’s economic commanders have just told the banks to cut back on loans may have more of an effect on a US portfolio than many may think.
Hold off on patting yourself on the back for avoiding all those China ADRs that have invaded the IBD Top 100 – plenty of US stocks have doubled over the last year and they certainly didn’t do that because of the make believe recovery here in the States.
China’s decision to slow the train down in terms of stock and property values will have an impact on the velocity of oil companies, infrastructure companies, miners, steel companies, copper companies and even agricultural plays.
Panic is not the name of the game, analysis is. You may be surprised to look over your portfolio and notice that a great deal of it is geared toward the growth in emerging markets. We hit new highs yesterday on the S&P and the last fund flow data I heard showed the first positive net money flow into equities in a long time.
Translation: everybody’s long.
Whether you believe that this is a hiccup or that China is truly concerned about engineering a soft landing, today may be a good time to get real about what you own and why. Let’s be honest with ourselves about where our exposure really is, whether our stocks are headquartered in China or not.
by ilene - January 20th, 2010 3:58 am
(Thank you, Terry)
Mainland banks in Shanghai’s red-hot housing market lent 99.58 billion yuan (HK$113.2 billion) in new mortgages last year, up dramatically from 5.8 billion yuan in 2008, as home seekers rushed to buy and prices hit new highs.
The banks lent 38.93 billion yuan to buyers of new residential properties and 60.65 billion yuan to buyers of second-hand homes, the Shanghai office of the People’s Bank of China said yesterday.
Lending soared more than 1,600 per cent compared with 2008, when the property market and overall economy were hit hard by the global financial crisis, the central bank said.
Beofre you start worrying, know this. (Classic Chinese oxymoronic title.)
Shanghai’s residential market shows no signs of a bubble despite a hefty price increase because demand remains strong, according to Jones Lang LaSalle.
Price increases "do not mean that the market has reached extreme valuations that typify a bubble", the real estate service firm said in a report yesterday. "Overall, the policy environment will evolve to keep prices from growing too quickly."..
Soaring home prices on the mainland have sparked asset bubble worries among the country’s top leaders, including Premier Wen Jiabao who promised to take action.
According to Shanghai Uwin Real Estate Information Services, average housing prices in the city jumped 65.3 per cent last month from a year earlier, hitting a record 20,187 yuan (HK$22,930) per square metre.
Shanghai Securities News reported earlier this month that the mainland would probably start imposing property tax in selective cities this year, a heavy-handed move to cool the red-hot housing market…
And rest assured, the non-bubble is going to be curbed.
Mainland will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets while keeping the country’s economic recovery on track, a top regulator said on Wednesday.
Mainland’s banking system is healthy despite last year’s explosive growth in credit and regulators could manage the risks, said Liu Mingkang, chairman of the Chinese Banking Regulatory Commission…
After handing out some
by ilene - January 7th, 2010 11:45 pm
Courtesy of Karl Denninger at The Market Ticker
By Scott Lanman and Craig Torres
Jan. 7 (Bloomberg) — U.S. regulators including the Federal Reserve warned banks to guard against possible losses from an end to low interest rates and reduce exposure or raise capital if needed.
“In the current environment of historically low short-term interest rates, it is important for institutions to have robust processes for measuring and, where necessary, mitigating their exposure to potential increases in interest rates,” the Federal Financial Institutions Examination Council, which includes the Fed, Federal Deposit Insurance Corp. and other agencies, said in a statement today.
Let me point out a few things.
- We have never seen a crash and rebound in US stock market history like what we have just experienced, except once. That "once" was 1929/1930. What followed next was a grueling grind – not a crash, but a grind that never ended, and in which the market lost more than 80% of it’s value. Those who argue "the bigger the dive the bigger the bounce" forget that the only true comparison against what we have just seen was in fact the prelude to a grinding 90%+ overall decline.
- If you believe in "long wave" cycles – that is, Kondratieff cycles, we have precisely followed the several-hundred-year long pattern though its latest incarnation, with the 1982-2000ish period being "Autumn." Winter follows fall. These cycles seem to happen mostly because all (or essentially all) of the people who lived through the last cycle’s horrors are dead. Unless we have found a way to break a cycle that has endured far longer than our nation, we’re right where we should be – which incidentally aligns with what happened in 1929/30 as well. This means that while there may be ups and downs we have not bottomed – not by a long shot – no matter what people tell you.
- Interest rates can only go up from zero. That should be obvious. Rising rates are not positive for equities and multiple expansion.
- The Financials are getting a tremendous bid the last few days, presumably on the premise that "employment is at least somewhat stabilizing." With zero short rates and a steep yield curve, this means they make