9.1% is the number- that’s GDP growth in China in Q3. It’s the lowest in 2 years, but that certainly doesn’t seem too bad to me in light of all that’s going on around the globe. Chinese exports were hurt by the slow down in Europe, but retail sales within China grew about 17%- that’s impressive.
One would think the markets would respond positively to this news- not so. Many news services are reporting 9.1% was a disappointing number. However, that’s not why those markets were down. With inflation being the primary enemy of the Chinese economy, a little cooling off of GDP is not the worst thing in the world.
It was news out of Germany that dampened the world’s appetite for risk and equities. German Chancellor Angela Merkel’s chief spokesman said EU leaders won’t provide a quick ending to the debt crisis at an Oct 23 summit. Last week, the market had been optimistic the EU would begin to deal with this problem. The Germans killed the optimism, and down stocks went. It seems all global equities markets are being held hostage to the EU banking crisis.
The Shanghai A shares sold off rather harshly overnight- down 2.35%- the B shares identical at 2.35%- leaving China markets still very deeply in Bear Market territory- down about 20% on the year.
There has been rumors abounding suggesting the Chinese are ready to step in a help with an EU bailout. The rumors say they are just waiting for the enormity of the problem to be defined. This was reported in the UK’s Sunday Times.
The main news out of China since yesterday is the August CPI number, which came out in the middle of the night while we were all sleeping.
The CPI number for August came in at 6.2%- down from a blistering 6.7% in July, indicating the inflation problem may have peaked, and now be on the decline.
On the flip side Industrial Output numbers came out as well, and showed a 13% gain. While the gain was fine, it was a 1% drop from the July figure of 14%, and the number put the brakes on the what had been a rising market responding to the lower CPI number.
Analysts and economists are now pretty much universal in their belief the Chinese economy will be in for a soft landing, and the Chinese government can at least stop the tightening regime, en route to a loosening of monetary policy somewhere down the road.
In response, the Shangahai A shares closed down .03%, and the B shares closed down .32%. A pretty flat day out in front of what I believe will be the start of a new China Bull over the next several months.
There’s limited news flow out there, and stocks are trading very light volume. All then news flow is US- Buffet puts $1 billion into BofA, Google buys Motorola, Gold is getting clobbered.
In overnight trading, the China markets were very strong with the Shanghai “A” shares up 2.82% and the B shares up 2.34%
The Wall Street Journal features an article that points out China consumption numbers don’t match with a China “implosion”.
In a move to further “open its borders” to international investors, China daily carries an article today suggesting in September, the Central Government will change to regulations and make it easier for foreign investors to buy and sell RMB from outside the country.
If this is true, this might accommodate China small caps, many of whom would like to do major buy backs of their shares, but have difficulty moving their cash out of the country to brokerage accounts where the transactions can take place.
The NY Times reports China is going to have a hard time “rebalancing” its economic growth away from a dependence on the manufacture of goods for exports and government sponsored infrastructure build out to a consumer driven economy wherein it benefits China to allow the RMB to strengthen.
There’s a great lesson for investors on Apple shares today. The next time you read “it’s all priced in”, think of Apple. Steve Jobs finally tendered his resignation yesterday afternoon due to health concerns, and the stock is only down 2%. I know it’s not China, but if you’re looking for a cheap stock, consider AAPL. Obviously, Jobs resignation was all priced in, and you can now buy the greatest tech growth stock in the world for about 7x this year’s earnings. This is a great stock to own and sell covered calls against.