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Chinese Buying Bank Shares – Central Huijin Investment Ltd.

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The biggest news out of China today was the announcement Central Huijin Investment Ltd., an arm of the sovereign wealth fund China Investment Corp, was buying shares of the 4 largest China banks in the Hong Kong market.

Chinese banks, like their Western Counterparts, are trading at multi year lows, weighed down by fears of bad real estate debts in China and the European Debt crisis. Housing prices fell in September, making inflation less ominous, but sparking new concerns about a bursting bubble.

The shares of the China banks, which had been very oversold, bounced anywhere from 7% to 15% on the news.

The state run securities journal predicted inflation in 2011 is likely to be about 5.5%- down more than 1% from the high, and GDP growth will come in around 9.4%- also down about 1% from 2010.

Against all this, the Chinese consumer is financially in the best shape in the world. BofA reports a household debt to income ratio of 18% vs 95% in the US. Chinese households have $5.1 trillion in savings, more than the GDPs of India, Brazil, and Russia combined. The Chinese middle class has grown to the size of the entire US population, and will be double our size in 10 years.

Despite all these relatively positive developments, in overnight trading, the Shanghai A shares squeaked out a .11% gain, and the B shares lost 1.4%. This market has not turned yet.

 

 

The Golden Week: Retail Thrives, Real Estate Dives – What’s Happening in China

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Sometimes you just get egg on your face. Last week as I read through the news feeds each morning on what’s happening in China, I gave a little bit of an overview, but I didn’t catch on to the fact that the internal China markets were closed the whole week, while the Hong Kong markets were open. When I reported on the Shanghai A and Be shares, it was the same closing quote for several days before I realized my gaff. Sometimes, I’m not totally with it. Easy to make the mistake as I don’t trade stocks in China- I trade in China companies with US listings, and there were plenty of those around.

Last week was what the Chinese call the “Golden Week”. Second only to Chinese New Year in importance, most Chinese take the entire week off. The more affluent travel and shop. Much like our Black Friday just after Thanksgiving, the Golden Week kicks off a shopping frenzy that lasts to about the end of November. Spending this week can be helpful in gauging the health of the Chinese economy.

Bloomberg reports China retail sales were extremely robust. Spending at shops and restaurants jumped 17%.5% over the previous year to $109 billion US.

Shopping during the Golden week is not relegated just to consumer goods. Real estate is also a major focus, and the news was good there as well. Real Estate sales remained slow, and prices continued to contract slightly.

Apartment sales in Beijing dropped 22.8% from a year ago, and crowds of home buyers were not out.

Food prices, while elevated, have remained stable, while energy prices have come down with recent price cuts in gasoline.

The world is pricing the China markets as if debt throughout the country will implode, exports will go in the toilet, and consumers will disappear. With real estate sales slowing, it would appear there could be some problems with debt. However, the 17.5% increase in retail sales suggest the ever growing number of Chinese consumer could step in to fill the gap for the slumping real estate market, and the very slight decrease in exports.

Experts who track the stats believe China’s CPI (measure of inflation) will continue to come in around 4.5% to 6%, and GDP growth will migrate to 8.5% to 9%.

I was a little surprised when I saw the Shanghai A shares down .6% and he B shares down .96% as the numbers out of the Golden Week suggest China could be headed for the soft landing investors on the long side are hoping for.

Those markets are now down 7 or the last 9 trading days, albeit with a week off in between.