Category Archives: China banks should not keep tapping the equity markets to raise funds

Hu, Unlike the Rest of the World, Is Confident in Europe

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  • Trading in China overnight was pretty lackluster. It’s “All Quiet on the Western Front” in front of Bernanke’s comments out of Jackson Hole today and the hope for some sort of QE3 stimulus package.
  • The Shanghai A shares were down .09%, surrendering very little of Thursday huge gain. The B shares were down .01%.

  • President Hu Jintao is jawboning up Europe in a meet and greet with French President Nicloas Sarkozy at the Great Hall in Beijing. China has about $3 trillion in Euro assets- about 25% of its foreign currency investment.Critics believes Sarkozy’s surprise visit is more about politics and winning his next election. The NDRC’s Wang says it is unlikely China will increase its holdings of EU government debt anytime soon. Sarkozy needed to “kiss the ring” to make sure they don’t sell a bunch of it.

  • Michael Pettis, and economics professor at Peking University, suggests weak foreign demand for Chinese manufactured goods could force a quicker rebalancing of the Chinese economy to one that moves from export depended to something more like the US where the consumer is 70% of GDP. Household consumption is only 34% of GDP in China. In order to bring household consumption to 40% of GDP in 5 years, it would require a growth rate of 11-12%.
  • Zhang Ping- chairman of the National Development and Reform Commission, was out talking about inflation, and warning it will be tough to rein in near term. ON the good news side, he also said the Bank of China would refrain from further interest rate hikes while the world economies remained unstable.
  • The President of one of the largest banks in China is out suggesting China banks should not keep tapping the equity markets to raise funds. China’s largest banks have sold $65 billion in equity this year.
  • That’s it for this week. We’re closing in on the end of Summer, and hopefully the idiots in Europe will get back to work and agree on some measures to shore up their sovereign debt. In the meantime, be careful of September in the market- it can be one of the historically toughest months.