Chinese markets were down again in overnight trading for the third day in a row and the last 5 of 7 days.
The Shanghai A shares were down .25%, and the B shares down .14%.
The price of copper, considered one of the leading indicators of industrial demand and the health of China’s manufacturing economy, fell to a 14 month low. Many believe this signals another global recession.
We’re going to need some economic numbers out of China suggesting the impending recession is not as bad as the market is pricing in, and the growing Chinese consumer can pick up any shortfall their export manufacturing might experience.
Here’s a few other news items out of China today:
Hedge fund manager and highly respected Bear and Short sell Jim Chanos estimates China’s debt to GDP ratio is close to 200%- worse than European countries. He says their debt crises will lead to 0% growth in 2012. He believe China will write of 7.5% to 10% of GDP to bad loans.
Resource investing news reports electric car demand is strong in Brazil, India, and China- price being the key sticking point.
In a move that many see as an “In Your Face” to the US Senate, China has frozen its currency at the current level. By a wide margin the US Senate recently passed a initiative to start crafting a bill that would allow the US to impose big tariffs on the imports of countries who do not allow their currencies to float. This is aimed directly at China. However, China observers point out- the last time China did this, it was three months out in front of a massive stimulus program.
That’s it for today. Perhaps better news tomorrow.
While October has been the “Bear Killer” most of the time since WWII, the China sector continues making new lows as speculation continues that the Chinese economy will go directly from overheated inflation to recession.
Not much news out of China over night. The Shanghai Markets were lower for a 3rd straight day and for 5 out of the last 7 trading sessions. The China markets are flirting with the lowest levels in 2 years.
In Wednesday’s trading, China’s Shanghai A shares were down .25%, and the B shares down .14%.
There’s a couple of news items out of China worth mentioning- Here you go:
Premier Wen Jiabao was out urging stronger financial support for China’s small businesses. He’s suggesting some bank credit support, preferential tax treatment, and a relaxing of the standards for non performing loans. Also, he wants banks to avoid “adminstrative intervention”. Now, there’s a concept we could use in the US.
China has officially become the world’s largest consumer of energy according to BP’s statistical review world energy. BP reports that in 2010, China used 20.3% of the world’s energy, while the US used 19%.
Llloyd Private Banking just completed a survey of private investors which concluded China has now become the most attractive market on balance of risk and return, with the UK, Brazil, and Russia coming in distantly behind. The Lloyds private banking customers noted they were mostly concerned about the Greek situation.
On Wednesday in China- last night for us, there was a subway accident injuring 271 people. It happened right in Shanghai’s financial district, so the markets in china naturally sold off.
The Shanghai A shares were off .95%, and the B shares off .17%. These indexes just continue bumping along the bottom at about the lows of 2010.
In Shanghai, 13 stations slowed their trains, and Line 10 closed. Special buses were brought in by the government to move people. Rail stocks of all sorts were clobbered in both Hong Kong and China trading.
In other China news:
Senior China officials were out yesterday stating China GDP growth would hit 9% this year. Lu Ahonguyan, deputy director for the State Economic research center, said there was no need to worry about a hard landing for the Chinese economy. Lu said the global slow down will help China contain rising prices and readjust the country’s economic structure.
Allan Liu, manager of the Fidelity Southeast Asia fund, revealed his favorite consumer stock picks for China. He is extremely bullish on Baidu (BIDU), and Sina Corp (SINA)- Bidu is the China equivalent of Google- Sina is a bit more like a functional Yahoo!. He also likes Hyundai Motors and Kia Motors. Fund manager Paul Winborne of JO Hambro Capital Management likes Sun Art Retail, China Mengui Dairy, Golden Eagle, Hengan Inernational, and Baidu.
Today was the day we were able to lock in our profits on the October Covered Calls on BIDU. We have made substantial returns with this strategy in the last 4 weeks. On Monday we get to do it again with the October calls. If you’re interested, sign up for your free two week trial.
The big news out of China today is the continue influx of foreign investment capital. Despite well known short sellers like Jim Chanos out there claiming China’s is going to fall of a cliff, and the newly minted king of short seller Carson Block (of Muddy Waters Fame) stating the Chinese consumer is overstated, the global investment community continues to pour money into China.
According to the Chinese Commerce Department, $8.4 billion flowed into China in DFI (Direct Foreign Investment) last month. Not only is this a giant number, it’s also up 11% over the previous month.
In 2011 (through end of August) FDI in China has risen 17.7% to $77.63 billion.While this still seems like a positive bet on China, it’s having a negative effect on the overall Chinese economy in the form of fueling inflation.
All this capital pouring into the country is keeping prices high, and inflation is the #1 problem the Chinese economy faces today.
China could put collars on the influx of capital to hold inflation down, but the Chinese would never turn their back on other people’s money. It’s not their way. They will take all the money offered. It’s a one way street. China will have to control its inflation through other means.
Here’s today’s news out of China:
The Chinese markets eaked out a tiny gain in Friday’s trading- The Shanghai A shares were up .09%, the B shares up .08%.
The Wall Street Journal reports the Chinese Ministry of Information is becoming more concerned about how internet use is effecting Chinese society. As a result, the Communists Party’s Politburo visited Baidu this past week to discuss the future of content that will be allowed. The stock is likely to be trading below its true value on perceived issues relative to both censorship and its corporate structure. This is a highly successful public company that has raised billions in foreign capital. In my view, the Chinese government will do nothing to derail the BIDU success- it would only discourage the influx of foreign capital.
The People’s Bank of China reported 49.6% believe consumer prices will continue to rise in the next quarter, up 4.1% from the last survey. 72% prices have risen “too high to accept”. This is the sort of information that might cause the government to continue aggressively tightening, and derails a “soft landing” scenario.
The Chinese government has disclosed it will invest $4.69 billion in infrastructure in Tibet between now at 2015 in 225 infrastructure projects.
Checked all the news feeds out of China, and there’s not much to report of major interest. Seems like the world has shut down as the East Coast enjoys a Christmas like last long weekend of the summer.
Here’s what’s happening in China:
There was almost no movement in the major China indexes today with the Shanghai A shares down .46%, and the B shares up .02%.
BIDU has been on a tear of late, but lost about 6 points from yesterday’s high thanks to a report by something called the Bedford Group suggesting China internet firms are under attack from their own government, and censorship is wide spread. They also suggest the censorship might help those big boys by eliminating some of the small competition. The stock has been on a tear of late, but is down 6 points from yesterday’s high of $151.
China manufacturing rebounded slightly in August, put costs were higher as well. The HSBC purchasing manufacturers index rose to 49.9 from 49.3. At the same time, new exports fell from 50.4 to 48.3. On these indexes, readings under 50 suggest contraction- over 50 is expansion. As a perfect reflection of the rest of the world, China export numbers suggest we are teetering at the brink of recession vs expansion. I suspect this will be the slowest period as the global news flow has to be slowing expansion appetites.
In a move I believe shows China’s commitment to help their rapidly expanding consumer class, the Chinese government has decided to eliminate income taxes for 60 million people. This will increase disposable income for the poorest people in the work force. This will also help mitigate some of the social unrest that is brewing thanks to rising food costs in China.
China Daily reports a new study suggests consumer lending in China could triple by 2015 to $3.3 trillion. This requires annual average growth of 24%. In terms of new financial products in China, mortgages are #1 and credit cards are #2. Currently, there are about 230 million credit cards in China- with young card holders averaging 2.6 cards per person.
That’s it for today. This will pick up next week as Wall Street’s big boys get back to work.